The Swiss National Bank said its foreign currency trades never exceeded 1.5 percent of the total daily volume in a single currency, avoiding market distortions.
“We were prudent and market-friendly and distributed transactions over time,” Alternate Governing Board Member Dewet Moser said in a speech in Zurich late yesterday. “Based on data from the Bank for International Settlements, we estimate that the share of the SNB in the foreign-exchange trading volume never exceeded 1.5 percent on any day in any currency.”
The central bank spent 188 billion francs ($199 billion) in 2012 to enforce its 1.20 franc-per-euro cap, which was introduced in 2011 to help shield Switzerland from a downturn. That has inflated foreign-currency reserves to 427.2 million francs at the end of December. Euros accounted for 49 percent of reserves at the end of last year, down from 60 percent in June.
“The interventions changed the weightings, in particular the euro significantly increased in the short term,” forcing the central bank to “cautiously” rearrange balances to the desired levels, Moser said. “Since these were substantial amounts, it seems reasonable to question whether our rearrangements affected the exchange rates. This was not the case.”
The SNB has repeatedly warned that a return of the euro crisis could again cause the franc to strengthen against the euro. It has also pledged to buy unlimited amounts of foreign currency to defend its limit of currency cap.
“We believe that at the current time the franc is still highly valued” and models suggest a range of 7 percent to 20 percent, Zurbruegg said.
Earlier this week, concerns about the Cyprus bailout sent the franc to a near three-week peak against the euro. The franc traded at 1.2208 against the euro at 8:22 a.m. in Zurich, while the dollar stood at 94.61 centimes.
The franc’s strength is a test for Switzerland, Zurbruegg said. “Swiss companies are very innovative and competitive,” he said. “But they still are challenged because the franc is highly valued, international competition is increasing and production costs are high.”
“The minimum exchange rate of 1.20 against the euro remains the central measure to ensure appropriate monetary conditions,” Zurbruegg said.