SNB reduced foreign exchange mountain by CHF 130 billion last year
Published: Tuesday, Jan 9th 2024, 12:00
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The Swiss National Bank's (SNB) large mountain of foreign currency shrank noticeably last year. The total stock decreased by around CHF 130 billion.
At the end of 2023, the value of the SNB's foreign exchange reserves was still CHF 653.7 billion, as the SNB announced on its website on Tuesday. A year ago, or at the end of December 2022, it was still worth CHF 784 billion.
A large part of the reduction is likely to be due to foreign currency sales. According to its own figures, the SNB sold around CHF 110 billion worth of foreign currency in the first three quarters of 2023; the amount for the fourth quarter is not yet known.
However, some of the changes are also due to exchange rate developments. Last year, the Swiss franc appreciated significantly against the most important currencies, which also led to a decline in foreign currency holdings when converted into Swiss francs. Against the euro, for example, the Swiss franc rose by around 6 percent last year and by almost 9 percent against the US dollar.
High foreign currency purchases before 2022
It is well known that the SNB bought foreign currency on a large scale in the years up to 2022 - especially after the minimum euro exchange rate was lifted at the beginning of 2015 - in order to prevent the Swiss franc from appreciating too much. In 2021, for example, foreign currencies worth CHF 21.1 billion were still being purchased, and in 2020 the figure was almost CHF 110 billion.
In mid-2022, however, it adjusted its policy due to rising inflation and prioritized sales. It used this instrument to combat imported inflation, as foreign currency sales tend to lead to a stronger franc, thereby weakening the upward pressure on prices for imported products.
However, as the Swiss franc has recently appreciated very strongly again, the SNB has already had to change this policy again. At the last assessment in mid-December, the monetary authorities stated that they would remain active on the foreign exchange market if necessary.
"However, we are no longer prioritizing currency sales," said Chairman Thomas Jordan at the time. The significant nominal and recent real appreciation of the Swiss franc had made further interventions superfluous, he said.
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