Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Swiss franc rises to six year high as central bank stands back

EconomyNov 30, 2021 04:16AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. FILE PHOTO: A sign is pictured on the Swiss National Bank (SNB) in Bern, Switzerland, October 11, 2021. REUTERS/Denis Balibouse

By John Revill

ZURICH (Reuters) -The Swiss National Bank is no longer standing in the way of the franc's appreciation, according to data published on Monday, in an eye-catching change in view of the safe-haven currency's rise to its highest against the euro in more than six years.

The central bank's apparent stance will confound investors who have grown used to the SNB's mantra that it would fight tooth and nail with negative interest rates and foreign currency purchases to restrain the Swissie.

On Monday, the franc rose to 1.0426 against the euro - its highest level since July 2015 - fueled by the emergence of a new COVID-19 variant, low Swiss inflation and the weakness of the euro.

The level is not far off the 1:1 against the euro the franc briefly reached after the SNB's last policy shift in Jan. 2015.

But the latest sight deposit data - a proxy for the SNB's interventions - increased by only 94 million francs last week, a fraction of the forex purchases seen last year.

One factor for the small increase could be the withdrawal by bank customers of cash, economists say, which happens every year in the lead up to Christmas and reduces the amount of cash the banks hold on sight with the SNB.

"Still, an increase of less than 100 million francs shows the SNB chose not to defend the 1.05 level," said J.Safra Sarasin economist Karsten Junius.

The development could mean the SNB has given up restraining the franc at its current level, because of benign Swiss inflation and the country's robust economy.

Instead, the central bank may be storing up its firepower to prevent rapid and large-scale appreciation instead, economists say.

The SNB declined to comment about Monday's data and the economists' reaction to it.

"If the franc stays at this level of around 1.05, a little bit above, a little bit below, the SNB won't do a lot," said Thomas Stucki, the chief investment officer at St Galler Kantonalbank and the former manager of the SNB's foreign currency reserves.


"They will prevent the movement below 1.04 to 1.03" he added. "Then they will step up interventions."

The franc was on course to eventually reach parity, Stucki added.

"It's clear from the development of inflation in Europe and Switzerland the franc will become more expensive over time," he said. "We don't expect parity to be reached next year, but we think it will happen in the next two to three years."

Over the weekend, governing board member Andrea Maechler said the SNB was monitoring the franc's level, although the central bank didn't target a specific rate, she said.

Swiss inflation at 1.2% is well within the SNB's definition of price stability and reduces the need to act.

"The long-term policy of the SNB remains in place: fight a strong overvaluation of the Swiss franc. The question is, however, what a strong overvaluation means," said UBS economist Alessandro Bee.

Due to the much stronger inflation in the Eurozone than in Switzerland, the fair value of the franc has climbed to 1.11 to the euro from 1.20 last year, he said.

"From this perspective at 1.05 the franc is not strongly over-valued anymore," said Bee. "This warrants a lower intervention threshold for the SNB, even at this point it is unclear where this new threshold exactly is."

The stance of the SNB will be tested in the coming days, particularly if the omicron variant of coronavirus increases demand for the franc.

"Now the situation is getting more complicated for the SNB," said ING economist Charlotte de Montpellier. "There is a risk of a renewed flight to safety and a strengthening of the currencies considered as safe havens, and therefore of the Swiss franc."

Until now, the SNB has done the right thing not wasting too much money defending the franc, said J Safra Sarasin economist Junius.

"I do think they will try to halt any appreciation at 1.03. That would be last line of defence before parity," he said.

Swiss franc rises to six year high as central bank stands back

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email