Swiss central bank continued currency sell-off in third quarter
The Swiss National Bank (SNB) accelerated its selling off of foreign currency holdings in the third quarter of 2022, continuing its new course after years of big purchases.
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From July to September, the central bank sold off CHF739 million of foreign currency reserves, according to data published on Friday. In the second quarter of the year, it had already begun the policy reversal, but with a modest offload of CHF5 million.
The selling off comes after years of buying foreign currencies in an effort to weaken what the SNB viewed as an “over-valued” Swiss franc. Dampening the value of the currency would help the domestic economy and exporters, it argued.
As a result, since 2015 (when the franc was unpegged from the euro), a total of around CHF350 billion in foreign currencies was purchased, with a notable high point of CHF110 billion in 2020, the first coronavirus year.
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The policy reversal announced in June this year was largely based on the fact that high inflation rates in Switzerland’s major trading partners had led to a weakening of the franc’s position. Nevertheless, the SNB said it would be ready to revert to purchases in the case of an “excessive appreciation”.
The euro, the most important currency for Swiss imports and exports, fell from near-parity in July to an all-time low of CHF0.94 at the end of September. On Friday morning, the European currency was worth CHF0.986.
As for the US dollar, after rising almost to parity in September, it has again fallen back: yesterday, it was valued at CHF0.92, its lowest level since March 31.
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While the Swiss franc keeps rising against the euro, hardly any voices can be heard in Switzerland denouncing the nation’s pricey currency.
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The SNB has taken a hit of CHF95.2 billion for the first half of this year, mainly owing to losses on foreign currency positions.
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