In the second quarter of 2022, the SNB stopped buying foreign currency, which had been common for years, to weaken the Swiss franc. For the first time in April-June, foreign currency was sold – and it was worth five million. SNB bought 5.7 billion in foreign currency in the first quarter.
In 2021, the SNB even bought 21.1 billion francs in foreign currency to prevent the franc’s undesirable appreciation – but this was far less than the massive interventions of around 110 billion francs in the 2020 corona year.
In total, approximately 350 billion francs have been purchased since 2015. By mid-2022, $884 billion of foreign exchange investment had accumulated in the SNB.
For many years the SNB considered the Swiss franc “significantly overvalued” or “overvalued”, thus interfering with the foreign exchange market. Therefore, he bought foreign currencies and put the Swiss franc into circulation. The plan: to weaken the franc and support the domestic economy with additional offer.
Meanwhile, SNB made a comeback: in its mid-June assessment, it announced for the first time that it no longer considers the franc overvalued. Because the Swiss franc depreciated mainly in trade. This is because inflation in its most important trading partners is almost at a gallop compared to Switzerland.
SNB Chairman Thomas Jordan said the Federal Reserve remains active in the foreign exchange market and will be willing to buy foreign currency in case of “overvaluation”. Conversely, if the franc weakened, the SNB would also consider selling the currency. Now he did it again.
Because the appreciation of the Swiss franc is the “ally” of the SNB. It helps reduce inflation imported into Switzerland. In fact, if necessary, the central bank can accelerate the appreciation a little by selling foreign currency.
In fact, the euro, the most important accounting currency for both imports and exports, fell from around CHF 1.00 to just under CHF 0.97 during the observation period from July to September. On the other hand, the US dollar gained nearly three inches to reach almost CHF 0.99.
At the same time, the SNB has increased interest rates three times this year and is now at 1.0 percent, after holding it at minus 0.75 percent for more than seven years.
(SDA)