SNB Made First Meaningful Franc Sales in Three Years After Trump’s Tariffs Triggered Surge

(Bloomberg) — The Swiss National Bank made its most significant sales of the franc in more than three years, acting to stem a surge in the currency caused by Donald Trump’s tariff push.

Switzerland’s central bank purchased foreign exchange worth 5.1 billion francs ($6.4 billion) in the second quarter, according to data published on Tuesday. That’s in line with estimates made by UBS Group AG before the announcement.

The interventions mark the end of an effective 15-month hiatus in the SNB’s market interactions, reflecting just how volatile conditions became after Trump’s April 2 announcement of “reciprocal tariffs.” The franc still rose some 10% against the dollar in the April-June period, while against the euro it strengthened about 2%.

The SNB’s decision to resort to franc sales, despite past US criticism of such moves, reflects its limited choices in countering the market, according to Ipek Ozkardeskaya, senior analyst at Swissquote in Geneva.

“The rate cuts have not been efficient in weakening the franc,” she said. “So the only remaining option was FX interventions, whether the US like them or not.”

On the eve of the announcement, Switzerland and the US issued a joint statement vowing not to manipulate currencies, with the SNB pledging to keep its monetary policy focused on price stability. In the document, both sides promised not to influence the franc-dollar exchange rate in order to gain an economic advantage.

Since June, the Swiss have been on a watch list of economies monitored by the Treasury for its foreign exchange policies. A spokesperson in Bern insisted at the time that the two countries were in a “constructive dialog,” though that was before the US slapped a 39% tariff on Swiss exports. Switzerland found itself branded as a currency manipulator during Trump’s first term in the White House.

SNB President Martin Schlegel has repeatedly insisted that the central bank’s interventions only serve the purpose of keeping Swiss inflation from over- or undershooting.

While the institution is stressing in its policy statements that it stands ready to use the tool — in both directions — policymakers appear to have adopted a new doctrine on the franc that focuses on more judicious confrontations with traders. In previous years, it has regularly mobilized tens of billions to steer the franc and insisted that the currency is overvalued.

Michael Pfister, FX strategist at Commerzbank in Frankfurt, said that the latest numbers are consistent with the SNB’s more judicious approach to interacting with foreign-exchange markets.

“I don’t think this changes the fundamental picture: if the CHF appreciates heavily in a short period of time, they will intervene,” he said. “However, if it appreciates more slowly, they will probably wait and see.”

The SNB is now facing the choice of stepping up currency purchases again or introduce negative rates, which it avoided in its policy decision last week, when it kept borrowing costs unchanged.

Ozkardeskaya reckons officials may lean on interventions for now because they are the “more efficient” option at present.

“Negative rates would have widespread consequences for the Swiss economy,” she said.

The SNB publishes a tally of its transactions on a quarterly basis but with a three-month delay. Data for the period from July to September are due on Dec. 31.

–With assistance from Kristian Siedenburg and Naomi Tajitsu.

(Updates with analyst starting in 10th paragraph.)

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