The Swiss central bank widened its foreign currency holdings in order to prevent the national currency to continue its rally, being the current foreign reserves in Switzerland the highest in twelve years.
The Swiss National Bank is struggling to prevent the franc to rally, as the demand for the Swiss currency has been on the rise since the first quarter of the year. The national foreign currency reserves reached 81.7 billion Swiss francs from a previous indication of 55.8 billion francs, being both reserves in euro, mostly, and in dollar, to a lesser extent, the most significant ones increased by the Swiss banking authority. The insistent rally in franc rates is rising concerns in Switzerland, affecting the national exports, as a higher currency lowers Swiss products price competitiveness abroad, and fears of deflation have been increasing, since the franc rates continue significantly high.
Analysts affirm that it will be a hard task to control the Swiss franc rates, as the demand for the currency remains strong, but since the SNB started a foreign currency purchasing currency, if the franc didnt weaken, at least its rally was contained versus a number of important currencies. As long as the government intervenes on the Swiss franc, we are likely to see it neutral or losing ground against currencies like the euro and the Australian dollar.
EUR/CHF traded near neutrality today with 1.5186 as of 12:51 GMT from 1.5195 yesterday. USD/CHF also remained stable.
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