The move appears to be part of a policy to diversify its holdings away from the euro, which have ballooned in recent years, as the bank has fought to suppress the value of the Swiss franc. It also coincides with renewed strength in the pound, which is being seen as a proxy for the Swiss franc as investors seek a haven from the problems in the eurozone.
The SNB raised the value of its holdings in the pound from SFr10.942 billion at the end of last year to SFr20.933 billion at the end of March,according to figures released on Monday.
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| Source: SNB, EuromoneyFXNews |
During the same period, the value of the SNB’s euro holdings dropped from SFr146.655 billion to SFf124.079 billion. The SNB introduced a SFR1.20 floor in EURCHF in September to stem what it termed as “excessive” gains in the franc and fight deflationary pressures in its economy, as haven demand for its currency soared as the eurozone debt crisis escalated.
That policy has been successful so far in preventing further gains against the euro. The SNB will be wary, however, given its expensive and unsuccessful attempts to rein in the value of the franc during 2009 and 2010.
That intervention campaign resulted in enormous paper losses for the SNB and sparked widespread internal criticism in Switzerland, since the ownership structure of the central bank means it is expected to share its profits with the country’s cantons.
Although Thomas Jordan, the new chairman of the SNB, has stated the central bank’s intention to vigorously defend the SFr1.20 floor, EURCHF has remained stuck close to that level in recent weeks amid renewed turmoil in the eurozone.
By selling EURGBP, the SNB not only reduced its exposure to the single currency, should the floor be tested, or even broken, but also helped maintain the upward momentum in sterling, a potential alternative to the franc as a currency that investors would flock to in search of safety.
Overall, the value of the SNB’s foreign currency holdings dropped from SFr257.504billion at the end of last year to SFr244.499 billion at the end of March.
The SNB also reported a net loss of SFr1.7 billion during the first quarter, largely due to exchange-rate losses.
Losses on foreign currency positions totalled SFr2.6 billion as the franc appreciated against the dollar, yen and euro, while a valuation gain of SFr0.8 billion was achieved on its unchanged gold holdings.