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Swiss Franc strength fuels speculation of SNB action

Recent Swiss franc (CHF) strength against the euro and other major currencies has driven speculation the Swiss National Bank (SNB) may intervene to weaken the currency. The SNB maintains reserves dominated by the euro but …

Recent Swiss franc (CHF) strength against the euro and other major currencies has driven speculation the Swiss National Bank (SNB) may intervene to weaken the currency.

The SNB maintains reserves dominated by the euro but also including U.S. dollars, yen, sterling, and Canadian dollars to sell francs if desired. Changes in these reserves are closely watched for signs of SNB action.

Strategists say the SNB could act to halt the franc’s rapid rise. Some suggest if the SNB does intervene, the franc could fall back into the 0.95-1.00 range against the euro seen earlier this year.

Curbing the franc’s gains could provide welcome relief for Swiss exporters by making exports more competitively priced. But it would draw down on the SNB’s reserves.

There are always tradeoffs to consider when a central bank considers currency intervention. The potential target range highlights what level the SNB may be comfortable with.

While the SNB’s next moves remain speculative without more data, the franc’s strength and its impact remain in focus if appreciation accelerates from here. The SNB has tools to deploy if it desires to rein in the currency.

The Swiss franc is currently trading at 0.9512 against the euro after hitting a new yearly low of 0.9457 on Friday.

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