Currency News: Swiss Franc Shock Hits Central Bank for $50B
Currency News
The Swiss National Bank (SNB) revealed on Friday that abandoning its currency cap on the euro in January cost the central bank 50.1 billion Swiss francs ($52 billion) in the first half of the year. In its interim earnings release, the central bank detailed the full extent of its balance sheet pain, as unlike most of its major counterparts, the SNB is privately run and has shareholders to report to like a regular company. Switzerland’s gross domestic product fell by 0.2 percent in the first quarter of 2015, but there are signs the economy is fighting back.
Image: Swiss National Bank
Marc Ostwald, a strategist at ADM Investor Services, concurred: “The evidence thus far is that it has weathered the impact of the move relatively well,” he told CNBC via email on Friday. The Swiss franc originally soared around 30 percent against the euro, after the SNB scrapped its four-year peg against the euro on January 15th and investors piled into the currency.
However, the Swiss has been on a roughly even keel since March and has pared its gains by roughly one-half. In an effort to decrease the currency’s appeal as a “safe haven” investment, the central bank has also introduced negative interest rates, which have proved contentious, according to Ozkardeskaya (FX Analyst at Swissquote Bank).
“The social costs of negative interest rates has become an important issue on the political platform, as Swiss households saw their savings flat while the pension funds had somewhat difficulties to generate return,” she said in a note.
