Swiss demand deposits fall, indicating reduced intervention in the foreign exchange market

The level of Swiss demand deposits fell slightly, data showed on Monday, indicating that the Swiss National Bank has scaled back its foreign exchange market interventions aimed at weakening the Swiss franc.

The total level of overnight deposits – cash held overnight by commercial banks with the SNB – fell to 751.83 billion Swiss francs ($779.99 billion) last week from 753.08 billions of francs.

Normally, an increase indicates that the SNB has sold newly created francs to commercial banks, whose accounts with the central bank increase accordingly.

The deal was a cornerstone of the SNB’s campaign to weaken the safe-haven franc in recent years, amid fears that the currency‘s high value will hurt Switzerland’s export-based economy and contribute to deflation. .

The SNB declined to comment.

Last week, the SNB changed tack, raising its main interest rate for the first time in 15 years and saying it would tolerate the franc’s strength barring “excessive appreciation” of the currency.

SNB President Thomas Jordan said the franc was no longer highly valued, due to rising inflation in other countries.

The decline in demand deposits did not surprise Karsten Junius, an economist at J Safra Sarasin.

“The SNB has made it all too clear that it has no intention of intervening in the foreign exchange market to prevent a stronger Swiss franc as long as developments go smoothly,” he said.

“Given their inflation forecast above 2% in the first quarter of 2025, it is clear that a measured appreciation of the CHF would be welcomed by the SNB as it would help keep the prices of imported goods down.”

UBS economist Alessandro Bee said he would be surprised if the SNB had intervened recently, especially after Thursday’s hawkish tone.

Still, because demand deposits generally reflect action in the first part of the week, this week’s data doesn’t give a good picture of what happened after Thursday, he said.

“We can wait until next week to have a clearer picture,” he said.

About Ruben V. Albin

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