Switzerland reaps rewards of FX market intervention as SNB currency reserves edge higher in January

Following LeapRate’s analysis that Switzerland’s rationale for removing the 1.20 peg on the EURCHF currency pair on January 15 was largely down to the Swiss National Bank pulling up its metaphorical drawbridge and safeguarding Switzerland’s vault-like economy in the face of increasing eurozone turmoil and floundering EU economies, the early effect on Switzerland’s continued stability are becoming available.

This morning, preliminary data calculated according to the standards of the International Monetary Fund shows that the Swiss National Bank’s FX reserves grew in January.

One of the facets of the action taken by the Swiss National Bank was that maintaining the three year old cap on the value of the franc against the Euro would cost 100 billion francs, thus the Swiss National Bank, which is 45% privately owned, removed this cost, safeguarding iself and the national economy not only against such a vast expense, but also against impending eurozone financial fall out as a result of quantitative easing measures announced in January by European Central Bank President Mario Draghi which require the purchasing of assets at 60 billion per month until late 2016, and the newly elected Syriza party in Greece which has its nation’s vast debt to the European Central Bank.

The data which was released today demonstrates that the Swiss National Bank held 498,398 billion Swiss francs in foreign currency at the end of January, compared with 495,130 billion francs in December, revised from an originally reported 495.104 billion, all of which is testimony to the strength of the franc which appreciated rapidly once the peg was removed.

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