A victim of its own strength

The Swiss National Bank’s sight deposits—that is, the amount of cash commercial banks leave with the SNB—has jumped sharply since last month. Typically, a rise in sight deposits suggests that the SNB is intervening in currency markets to weaken the franc. It clearly isn’t working. The Swiss franc has rallied relentlessly vs. the euro This has been especially true as  the manufacturing slump in Germany worsens, pulling the economy closer to recession. In contrast, Switzerland is a victim of its own economic strength, which is spurring capital flows into the safe-haven franc. With Swiss interest rates already at  negative 75bps, and the ECB looking ever more dovish, the SNB will likely need to be more creative if it is be successful taming the CHF’s strength.



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