Euro purchases push central bank into red

Switzerland’s central bank is expected to post a loss of SFr4 billion ($3.8 billion) for the first half of 2010 after investing heavily in tumbling euros.

The Swiss National Bank (SNB) said on Wednesday that it spent around SFr132 billion to keep the Swiss franc down by boosting the demand for euros. The money went largely to buying the common European currency.

The Swiss franc still climbed against the euro during the first six months of the year, amounting to more than SFr14 billion in losses for the bank.

That hole was partially filled by profits made on other foreign currencies and the sharp rise in gold prices. Economists say there is potential for the euro to rebound and for the SNB to recoup its losses.

In addition, the Stabilisation Fund created to help get troubled Swiss bank UBS out of a toxic-asset slump is expected to turn a profit. Those figures were not included in the half-year report, which will be published in full on August 13.

Late last year, the Swiss had to pay around SFr1.50 for a euro. On July 1 the franc reached its strongest ever position, with a euro costing SFr1.3070.

The central bank has since slowed its intervention in the monetary markets as manufacturing exports and job expectations have picked up, with the franc hovering at SFr1.30-SFr1.35 against the euro.

swissinfo.ch and agencies