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Swiss Franc Slips As SNB’s Total Sight Deposits Surge Again

April 7, 2020 at 16:22 by Andrew Moran

Looking between the Swiss franc notesThe Swiss franc is sliding against the US dollar and the euro on Tuesday as the central bank’s sight deposit holdings surged by their second-highest level in 12 months. For more than a year, Switzerland has been actively trying to depreciate the franc’s value as investors continue to pour into the traditional safe-haven asset, even as financial markets rebound. The Swiss franc has significantly appreciated throughout the turbulence, affecting the manufacturing sector and overall exporting industry.

This week, sight deposits surged $4 billion to $642 billion, up from $638 billion in the previous week. The Swiss National Bank’s (SNB) rise in sight deposits is the second-highest holdings boost in the last 12 months.

By performing this monetary action, the SNB credits the sight accounts for commercial financial institutions with newly printed francs in exchange for foreign currency, which is usually the greenback. Experts also present the case that another reason for the sight deposits’ increase could be the SNB offering greater liquidity to commercial banks through its COVID-19 refinancing facility (CRF). By doing this, there will not be a credit crunch, allowing the banks to continue lending to borrowers – businesses and individuals.

Meanwhile, the liquidity operations could help avoid the Swiss interbank overnight interest rate from rising or dropping too much from the SNB’s target rate of -0.75%. Officials have said they are willing to expand their interventions to stabilize the franc to shore up dollar liquidity and weaken the franc.

The SNB has also been one of several other central banks to coordinate with the Federal Reserve in participating in a dollar liquidity boost. The franc and the dollar have been the most sought-after currency assets during the global financial turbulence.

In total, the central bank’s foreign exchange holdings did slip to $788 million in March, down from $792 million in February.

The USD/CHF currency pair tumbled 0.8% to 0.9707, from an opening of 0.9788, at 16:04 GMT on Tuesday. The EUR/CHF rose 0.09% to 1.0571, from an opening of 1.0563.

If you have any questions, comments, or opinions regarding the Swiss Franc, feel free to post them using the commentary form below.

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