SNB Touts Intervention Threat as Iran Crisis Rattles Markets
(Bloomberg) — The Swiss National Bank said it stands ready to intervene in currency markets, hardening its tone on foreign exchange to respond to reverberations from the Iran crisis.
The central bank, which is already struggling to stoke any price growth in Switzerland, issued an unsolicited statement threatening to act against gains in the franc as the impact from US action in the Middle East rippled around the world.
“In view of international developments, we are increasingly prepared to intervene in the foreign exchange market,” it said in e-mailed remarks to media outlets. “We are ready to intervene in the foreign exchange market to curb a rapid and excessive appreciation of the Swiss franc, which would jeopardize price stability in Switzerland.”
The announcement marks a shift in tactics by policymakers, who have sought recently to adopt a more judicious approach to deploying franc sales. While the SNB regularly cites its readiness to step into FX markets in policy statements and speeches, it hasn’t issued an unprompted verbal intervention of this kind in years.
SNB President Martin Schlegel has said repeatedly that excessive franc appreciation from global haven flows could threaten price stability in Switzerland.
“The main risk at the moment is of course the world economy, geopolitics — and as you know, the Swiss franc is a safe haven,” he said in an interview in January.
On Monday, the currency fell as much as 1.3% to 0.7795 per dollar, its weakest in a month. The greenback gained against all Group-of 10 peers.
The franc has been at its strongest levels against the euro and the dollar since 2015, underscoring its status as the market’s cleanest safe haven.
“This is an upgrade on the classic SNB line that they ‘remain willing to be active in the foreign exchange market as necessary’, which Schlegel reiterated in late-February,” said Ben Ford, FX strategist at Macro Hive. “In short, that means they are concerned about exporters getting upset about currency strength, and deflation returning as a theme.”
Investors have brushed aside the risk of intervention, favoring the franc as an alternative to the US dollar.
Despite elevated spot levels and the lingering threat of SNB policy pushback, options traders have continued to add bullish exposure. One-week risk reversals flipped earlier Monday to their most franc-positive bias since April, before some of that momentum faded.
“What it really doesn’t want is too strong, too rapid an appreciation,” said Greg Hirt, chief investment officer of multi-asset strategies at Allianz Global Investors. “It has been quite a ride for the franc.”
The strength of the currency is a problem for the SNB because, via lower import costs, it depresses inflation. Consumer prices in February probably stagnated compared with a year earlier, according to the median forecast of economists. Those data will be released on Wednesday.
The central bank targets inflation of 0-2%, but has struggled to achieve that recently. Schlegel told Bloomberg in January that Switzerland could see individual months with subzero readings this year, but added that this wouldn’t be a problem because the SNB target is a medium-term one.
What Bloomberg Economics Says…
“The appreciation of the franc poses downside risks to Switzerland’s price outlook, with inflation already expected to slip to 0% in February. With the bar for cutting rates back into negative territory high, the SNB is stepping up its FX intervention rhetoric. Given the drivers of the current rally, such intervention could effectively curb volatility and cap the franc.”
—Jean Dalbard, economist
Still, with Swiss interest rates at zero, sustained undershoots of the goal will put pressure on the central bank to return to negative borrowing costs, which have previously been shown to hurt the financial system. Schlegel and colleagues have said that the bar to a cut is higher than for a normal reduction, but that they will enact one if required.
The SNB’s years of FX interventions have swelled its balance sheet, making the central bank’s earnings particularly vulnerable to swings in currency markets.
Earlier on Monday, it published the final version of its 2025 results, which showed an 8.8 billion-franc ($11.4 billion) loss on FX positions. Higher gold prices helped offset that to ensure a profit for the year.
–With assistance from Alice Gledhill, Vassilis Karamanis and Jan-Henrik Förster.
(Updates with analyst in 12th paragraph)
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