Swiss Central Bank Reduced Its Push to Prop Up Franc at End of 2023

(Bloomberg) — The Swiss National Bank reduced its sales of foreign exchange in the fourth quarter as the franc soared against the euro.

Switzerland’s central bank sold currency worth 20.3 billion francs ($23 billion) from October to December, down from 37.6 billion francs the previous quarter, according to Bloomberg calculations based on full-year SNB data.

That suggests officials shifted toward the SNB’s new stance on interventions — which was announced in mid-December and allows action in both directions. 

By selling foreign exchange reserves and buying its own currency, the SNB in 2022 started to prop up the exchange rate and simultaneously reduces its large balance sheet. Those interventions allowed it to shield the Swiss economy from a global inflation surge. 

For the whole of 2023, the SNB sold 132.9 billion francs. That compares with sales of 22.3 billion in 2022, and purchases worth 21.1 billion francs in 2021. 

The Swiss franc surged 4% versus the euro during the fourth quarter, hitting a its strongest level in nearly a decade at the end of 2023. Since the start of this year, it has tumbled, nearly reversing its quarterly gains versus the common currency on the view that the SNB may start cutting interest rates before mid-year.

The SNB’s slowdown of currency sales means that the process of reducing its bloated balance sheet is now effectively stalled. Last week the OECD warned that the central bank’s hoard of assets is too big for comfort.

The SNB publishes a tally of its transactions on a quarterly basis and with a three-month delay. The fourth-quarter number can be deduced from full-year figures, which feature in the central bank’s annual report published Tuesday. An official announcement is due on March 28.

–With assistance from Naomi Tajitsu, Mark Schroers and Bastian Benrath.

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