Swiss sight deposits jump spurs talk of central bank currency intervention

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4 days ago

By John Revill
ZURICH (Reuters) -Cash lodged by commercial banks overnight with the Swiss National Bank rose to its highest level in 15 months last week, data showed on Monday, sparking speculation the central bank could be intervening to weaken the Swiss franc.
Total sight deposits held by the SNB increased by 11.2 billion Swiss francs ($14.00 billion) to 475.3 billion francs, the highest level since April 2024.
Normally an increase can be seen as a sign the SNB is buying foreign currencies from banks and crediting their accounts with newly created francs, a way to weaken the safe-haven currency whose high value has weighed on inflation.
The SNB declined to comment on the data.
GianLuigi Mandruzzato, an economist at EFG Bank, said the increase could mean the SNB intervened last week, although other factors could be involved.
"With interest rates at zero and with the SNB reluctant to go negative, intervention is likely to be its favoured approach," he said.
Maxime Botteron, an economist at UBS, said the sight deposit rise could signal interventions, although other explanations were more likely.
"They could have intervened, but there was no urgent need to do so," he said.
"The franc appreciated moderately against the euro last week, but did not reach the April high, and I don't think the SNB would intervene against the dollar."
Instead, Botteron said the increase in sight deposits could reflect the expiration of SNB bills, where the principal is repaid to the banks who bought them at the end of their term and the money credited to their sight deposit accounts.
The money could also be due to the SNB not rolling over existing repos, and instead repurchasing the instrument from banks and crediting their sight deposit accounts, Botteron said.
Karsten Junius, chief economist at J. Safra Sarasin, doubted the SNB was intervening, with the sight deposit data more likely showing the SNB scaling back its use of bills and repos.
"If they are reducing the use of these instruments, it could be because the SNB is trying to steer the SARON lower by taking less liquidity out of the market," he said, referring to the Swiss interbank rate.
($1 = 0.7999 Swiss francs)