SNB FX Reserves Decline Minimally In June As Bank Takes Brief Break From Currency Intervention; Trade-Weighted CHF At Record High

After the Swiss National Bank earlier in June announced it was taking a break from FX intervention in the form of gobbling up euros and selling francs, when its balance sheet exploded courtesy of a fivefold surge in FX reserve holdings, the result has been a minimal decline in FX reserves, dropping slightly from CHF 232 Bn to CHF 226 Bn in June. Alas, at the same time, the CHF has continued appreciating, and as Goldman points out, the trade-weighted Swiss Franc has surged by 4% in the past to weeks. Furthermore, as we pointed out last week, the SNB may well be back in full intervention mode, following the dramatic surge in the EURCHF seen last Friday. Look for July's SNB balance sheet update confirm whether the SNB is once again actively devaluing its currency.

Here are observations on the latest SNB balance sheet update from Goldman Sachs:

Switzerland: SNB's FX reserves dip in June, following change in policy on interventions

Released: Tuesday, July 13, 2010 at 09:30 (Switzerland)

SNB's FX reserves dip in June, following change in policy on interventions

Preliminary data published on the SNB's website this morning show that foreign currency reserves held by the SNB fell from CHF 232bn in May to CHF 226bn in June (Chart 1).

Though these data are preliminary, they suggest that in light of its June Monetary Policy Assessment, the SNB has suspended its FX interventions - originally intended to prevent an 'excessive appreciation' of the Swiss franc. Meanwhile, the trade-weighted CHF has appreciated by almost 4% since the SNB meeting on 17 June (Chart 2).

Confirmation of the SNB's balance sheet (and a detailed breakdown by individual line item) will come only in the Monthly Statistical Bulletin published by the SNB on 21 July. In terms of the bigger picture, however, despite the policy-significance of the dip in FX reserves in June, the volume of foreign currency assets accumulated on the SNB's balance sheet has increased almost fivefold since the beginning of 2009.

These balance sheet data have been released at irregular intervals (and by various sources) over the last few months. It seems that, while the SNB's balance sheet has historically been published in the Monthly Statistical Bulletin towards the end of the month following the reference month, in recent months a 'flash' preliminary estimate of selected line items was published by the Swiss Federal Statistical Office a few weeks ahead of the SNB. This was not taken well by the central bank and, as far as we can tell, the SNB will now publish - in the first few working days following the end of the reference month - an estimate of the foreign currency reserve position. The release of the June data is the first time the SNB has published its headline FX reserves with this shorter lag under the IMF's Special Data Dissemination Standard: http://www.snb.ch/en/iabout/stat/statpub/imfsdds/id/statpub_imfsdds_actual

Comments

[SheepDog-One]

Que Frank Drebend fireworks factory blaze 'nothing to see here people' Police Story scene.

[43 Steelie]

God, NovaGold is a screaming buy right now.

[fuu]

OT but wtf is up with silver today? That is a fugly daily chart.

[doolittlegeorge]

Are they loading up on "Chinese real estate," too?

[jmf]

Moin from Germany,

via FT Alphaville

http://ftalphaville.ft.com/blog/2010/07/06/279261/missing-from-the-swiss-central-bank-chf6-3bn/

A look through the FX reserve data shows that much of the fall can be accounted for by an increase in gold holdings. The SNB’s gold holdings at market value went from 39.1bn to 45bn showing an increase of 5.9bn (gold measured in CHF terms was actually down by 4.8% during June).

Thus instead of providing an indication of the SNB’s intervention stance, what we have is interesting insight into the SNB’s portfolio allocation which interestingly is showing a bias toward holding gold

But the funniest part is the 2005 flachback

The Swiss National Bank completed its gold selling program of 1300 tonnes on March 30, 2005

[surfer]

Unless im missing something the reduction in CHF equivalent reserves represents the LOSS on their EURCHF possie

[idle muesli]

The thing for the Swiss to do would be to encourage Swiss companies to purchase foreign assets and maybe even new subsidiaries (maybe through new legislation); they'd get a great deal on euros, and drive the Swissie down for others at the same time.

[herry]

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