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ZURICH, December 13 (Reuters) – Demand deposits at the Swiss National Bank rose to their highest amount in seven months last week, indicating that policymakers are taking decisive first steps to tackle a surge in the value of the franc against its main rivals, in particular the euro.
Total sight deposits, which includes other sight deposits in Swiss francs, reached 722.718 billion francs, against 720.336 billion francs the previous week, according to data from the SNB.
The 2.4 billion franc increase last week was the largest increase since May 20, indicating a change in tactics by the SNB which had appeared to be sidelined even as the franc reached its highest value. high against the euro since July 2015 on December 3.
A rise may indicate central bank intervention in foreign exchange markets to weaken the franc, a key part of the SNB’s strategy over the past six years.
The SNB buys foreign currency from commercial banks in exchange for newly created francs which are then credited to their current accounts held by the SNB.
The previous weeks have seen only small increases in sight deposits, with the franc crossing the 1.05 mark against the single currency and continuing to strengthen. It has gained more than 5% since mid-September against the euro.
The SNB, which is due to announce its latest monetary policy decision on Thursday, declined to comment.
“The SNB appears to have stepped up its fight against the strength of the CHF,” HSBC said in a note, adding that President Thomas Jordan was probably more concerned with the speed of the currency’s appreciation than the level it has reached. hit.
“The decline in EUR-CHF over the past 12 weeks has been the fastest since the de-pegging,” added the bank, referring to the euro / Swiss franc exchange rate by its popular nickname.
UBS economist Alessandro Bee said the increase in demand deposits could mean the SNB was unwilling to let the EUR-CHF exchange rate slide below 1.04 in the short term.
Karsten Junius, economist at J. Safra Sarasin, said the SNB’s currency purchases would likely have been higher than the CHF 2.4 billion increase in sight deposits, as the seasonal cash withdrawal approaching Christmas means that demand deposits generally go down at this time. period of the year.
“The SNB was not comfortable with the speed of the exchange rate appreciation that we have seen in recent times. In particular, the move below 1.04 EUR-CHF and the closer proximity of the level 1.03 that we see as crucial could have triggered stronger interventions, ”Junius said.
He said he expected even stronger intervention from the SNB in the coming weeks in case the franc moves towards 1.03 against the euro.
Reporting by John Revill; Editing by Saikat Chatterjee and Ed Osmond
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