SNB Continues to Intervene in FX Markets

The Swiss
National Bank continued to intervene in foreign exchange markets in 2016 with
the intention of averting Swiss franc strength.

According
to the central bank’s latest annual report, it bought a total of
CHF
67.1 billion in foreign currency, from CHF 86.1 billion in 2015. The latter
included intervention in the two weeks ahead of the central bank removing the
EUR/CHF floor on January 15, 2015.

The SNB’s reported a profit of CHF 24.5 billion in 2016, following
a loss of CHF 23.3 billion in the previous year. It says the positive result
was primarily attributable to gains of CHF 19.4 billion on foreign currency
positions and CHF 3.9 billion on gold holdings.

The central bank says it again intervened in the foreign
exchange market “to counter an undesired tightening of monetary conditions”

It adds, “These interventions occurred mainly at times of
heightened uncertainty, when the Swiss franc was particularly sought after as a
safe investment. As in preceding years, the SNB did not generally comment on
individual interventions, except for foreign currency purchases made in June
2016, when the UK’s decision

to leave the EU gave rise to uncertainty.

“The export-weighted nominal external value of the Swiss
franc rose slightly in 2016,” it adds. “The Swiss franc was somewhat stronger
against the euro at the end of the year than at the beginning, although this
appreciation was partially offset by a mild depreciation against the US dollar.

Colin Lambert

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