The central bank has amassed record reserve holdings equivalent to almost 70% of Swiss GDP after imposing a SFr1.20 floor in EURCHF in September 2011, in a bid to protect its export sector from what it considered an excessive overvaluation of the franc.
Those reserves surged higher in the second quarter of last year as worries over the eurozone debt crisis escalated, forcing the SNB to step into the market to enforce the floor as investors poured funds into the perceived haven of Switzerland.
Selling pressure on the single currency duly intensified during the third quarter, as the SNB diversified its reserves away from the euros it was receiving as a result of its intervention activities and into other currencies, such as sterling and the Canadian and Australian dollars.
However, figures on Thursday revealed that SNB reserve growth barely increased in the fourth quarter of 2012, climbing from SFr429 billion in the third quarter to SFr432 billion, suggesting less need to intervene as eurozone stresses eased.
Furthermore, the proportion of SNB reserves denominated in the dollar, sterling, the Canadian dollar and other currencies, which includes the Australian dollar, remained stable, while the weighting of the euro increased, from 48% to 49%, and the share of the yen dropped from 9% to 8%.
| Currency breakdown of Swiss National Bank foreign currency investments (%) |
 |
| SNB |
Those figures serve as an early warning of what has been a dominant theme in the FX market in January: the redistribution of reserve holdings back into the euro.
That has seen EURGBP, EURCAD and EURAUD all surge higher amid increased optimism that the European Central Bank has got to grips with the problems in the eurozone financial system.
Kiran Kowshik, FX strategist at BNP Paribas, says the figures suggest there is no more pent-up demand from the SNB to diversify away from the euro.
“It suggests less euro selling pressure going forward, particularly if underlying eurozone stress continues to remain low as we expect,” he says.
“This should translate to even less resistance to a continued appreciation in euro crosses more generally.”
That is all fuel for euro bulls, who have this week seen the currency rise to its highest level in more than a year on a trade-weighted basis.