Yesterday, the Swiss National Bank announced it engaged in currency interventions worth 90 billion Swiss francs in the first half of 2020. For context, that means the central bank spent more in six months than in the previous 3 years combined. While the SNB has announced it will begin publishing this data more frequently, sight deposits of domestic Swiss banks - a proxy for the SNB’s intervention in FX markets indicate a higher level of activity by the bank this year. According to an analysis by ING, this revelation makes the SNB meet all three criteria to be labelled a currency manipulator by the U.S. Treasury - the other two being a) a significant trade surplus with the U.S. and b) a current account surplus. The U.S. Treasury’s semi-annual FX report - due in May - has not been published yet. But if the U.S. were to designate Switzerland a currency manipulator, ING suggests that the franc could appreciate more in a frenzy of speculative buying as many investors suspect the SNB would have to review the upper-bound of its tolerance band for the currency.
Chart and commentary by Ritvik Carvalho
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