June 7 (Bloomberg) -- The Swiss National Bank’s foreign-currency reserves rose to a record in May, a month during which the franc fell against both the euro and dollar.
Holdings increased to 441.4 billion francs ($476 billion) from a revised 436.1 billion francs in April, the Zurich-based Swiss National Bank said on its website today. The holdings are calculated according to International Monetary Fund standards at the beginning of every month.
The SNB, which committed to defending a ceiling of 1.20 per euro in September 2011, has amassed foreign-currency reserves equal to about three-quarters of Switzerland’s annual economic output with its efforts to defend the limit.
The increase was fueled by valuation effects and not by new purchases, said Alexander Koch, an economist at UniCredit Group in Munich. “The latest franc depreciation, pushed by speculation about an increase in the minimum exchange rate and negative interest rates, actually brought some relief for the SNB.”
The franc depreciated 1.3 percent against the euro last month, breaking through the 1.26 per euro mark for the first time in two years on May 22, after SNB President Thomas Jordan said that a shift in the cap and negative rates were in the central bank’s toolkit. Against the dollar, the Swiss currency fell 2.5 percent in May.
“We rate the chances of respective SNB action in both cases as very low in the current environment,” Koch said by e-mail. “A higher minimum exchange-rate target faces heavy resistance from other central banks and would complicate a future exit. And negative interest rates would possibly even increase tailwind for the housing boom, indicated by the experience of Denmark.”
The franc was little changed against the euro after the report, trading at 1.2302 at 9:41 a.m. in Zurich. Against the dollar, it stood at 92.90 centimes.
As of the end of the first quarter, the SNB held 48 percent of its reserves in euros, 27 percent in dollars, and 9 percent in yen. The bulk is held in highly rated government bonds with 15 percent in equities.
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