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Swiss National Bank FX Interventions Bigger Than in 2015

October 7, 2020 By Mircea Vasiu

In 2015, the Swiss National Bank (SNB) gave way to the 1.20 fixed exchange rate on the EURCHF cross. For several years, it kept selling CHF, constantly intervening in the FX market. 

As such, January 2015 still remains in history as the month when the online trading industry almost crashed. So disrupted was the SNB’s move that the CHF pairs literally had no market anymore. In other words, brokers could not offer a bid or an ask price for any of the CHF pairs. It all went away at the cost of tens of billions of CHF for the SNB.

It was nothing new for the SNB. This is a special central bank that plays an active role in controlling the exchange rates on the CHF. What is interesting is that in 2020 so far, the SNB exceeded the amount used to intervene in the markets in 2015. It tells a lot about the international demand for owning the CHF, a safe-haven currency, and the SNB’s efforts to stem that demand.

CHF90 Billion Spent in the First Six Months in FX Interventions

Only in the first half of 2020, the SNB intervened in the FX market at the cost of CHF90 billion. As a comparison, in 2018, it spent only CHF2.8 billion for the entire year, and in 2015, for the entire year, it spent CHF86.1 billion.

The level of the SNB’s intervention tells us about the severity of this crisis. When investors are willing to do anything to get their hands on the CHF, the “store of value” quality fiat money most possess becomes more than evident.

Relatively recently, the SNB announced that it would make its FX interventions public on a quarterly basis. The announcement came as a new step forward towards increased transparency from one of the most mysterious central banks in the world.

Now that the data is public, and we see the size of the SNB’s FX intervention, some of its recent actions become obvious. For example, the SNB announced recently that commercial banks will start to charge the negative interest rate applied by the central bank, -0.75%, to all deposits smaller than CHF100,000. Up until now, those deposits were excluded. That is just another way the central bank intervenes to stimulate households to put the money into the economy and stimulate growth.

It would be interesting to see what the total FX interventions for the year will be. At this point, we know the SNB probably stands on the other side of every CHF long trade.