Major drivers for the Swiss Franc, overseas investment returns and stock market flows, look to be shifting how the central bank reacts to the strength of the currency.


Typically, the (SNB) has taken action to prevent excessive appreciation of the Franc. Yet in August, as the currency reached a nine-month high against the Euro of 1.0694, there was no significant rise in banks’ so-called ‘sight deposits’, a usual indication of central bank activity.


According to analysts, the Swiss Franc’s latest rise shows foreign investment flows into Swiss stocks as opposed to speculative bets, as well as a boom in overseas stocks held by the SNB.


The central bank’s viewpoint on the Franc will take centre stage at this week’s monetary policy meeting. The -0.75% interest rate is forecast to stay the same, the lowest in the world.


The SNB hiked its inflation forecasts at the monetary policy assessment in June, yet maintained its ultra-loose policy. The central bank described the Franc as “highly valued,” adding it was prepared to intervene in forex markets if necessary, Reuters reports.


The Swiss balance of payments numbers for Q1 2021 show portfolio investment inflows of $12.2 billion, just under $13 billion from early 2015, according to Refinitiv data.

J.Safra Sarasin economist, Karsten Junius said that in the six months up until the end of August, the country’s blue chips outperformed global equities by 6 percentage points.

Junius added that Swiss multinationals had taken advantage of the business cycle shift as the global economy cools from the rebound early this year.


“The SNB is probably asking, do we want to fight this? Can they do anything against the moderating of the global business cycle?” Junius commented.


“Speculative flows into the franc is something you can fight, but this is a fundamental change in the economic cycle,” he added. “The SNB is having to accept this development, and has decided to stay on the sidelines.”

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