Rabobank's Senior FX Strategist Jane Foley describes how the Swiss National Bank has actively countered safe haven inflows into the Swiss Franc since the Iran war, selling CHF and signalling increased willingness to intervene. With low inflation and modest growth risks, the Swiss National Bank (SNB) is expected to keep FX intervention as a key tool while rate hike prospects remain finely balanced.

SNB balances FX and policy risks

"Indeed, SNB data confirms that the authorities sold CHF in Q1 this year suggesting that intervention did occur."

"It has been reported that the SNB purchased CHF3.9 bln worth of foreign currency in the first three months of this year."

"Last week SNB President Schlegel repeated the warnings that the central bank was ready to intervene in the market if needed."

"For now, we expect that the SNB’s focus will remain on emphasising that FX intervention is a policy tool with the aim of dissuading speculative buying and preventing the CHF from appreciating."

"While the risks of a SNB rate hike would increase if the ECB extends its hawkish position, tightening potential is still finely balanced given the continued relative strength of the CHF."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)