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Data suggests Swiss National Bank intervention to trim rising franc
[ZURICH] Rising sight deposits suggest the Swiss National Bank (SNB) intervened in currency markets last week to temper the rising Swiss franc and keep the safe-haven currency from further taking a bite out of the country's export-dependent economy.
Total sight deposits including cash domestic banks hold with the SNB rose to 539 billion Swiss francs (S$763.170 billion) from 535.194 billion francs the previous week, data showed on Monday.
The SNB had impetus to intervene last week as the franc slipped to 1.0629 francs per euro, the strongest it has been relative to the common currency since the market turbulence surrounding Britain's vote in June to exit the bloc.
By Monday, the franc had weakened to 1.067 per euro.
The SNB declined to comment on its activities, but economists said the numbers demonstrate that the central bank likely stepped in to mitigate the franc's rise.
"The rising sight deposits signal that the SNB intervened in currency markets," said Gero Jung, chief economist at Mirabaud Asset Management, who reckons the franc will remain strong despite the central bank's efforts to drive it lower.
According to the private bank's baseline scenario, the franc will end the year at about 1.06 francs per euro, roughly the current level.
Switzerland's central bankers including Chairman Thomas Jordan have stuck steadfastly to currency intervention and a policy of negative interest rates as they seek to keep a lid on the value of the franc since scrapping a cap against the euro in January 2015.
Mr Jordan has repeatedly emphasised that the franc is "significantly overvalued".
A vote over the weekend in which Swiss citizens rejected a corporate tax overhaul sent shockwaves through Bern's political circles and prompted concern from the EU, but monetary experts said that result was unlikely to have dramatic bearing on the value of the franc.
"The SNB will likely stick to its current policy and remain active in currency markets," Credit Suisse analysts wrote in a note on Monday.
"Even so, we expect that the intervention will likely be less active than it was in the past year."