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SNB Keeps the Franc in Check

Sight deposits at the Swiss National Bank went up last week after officials committed to keeping the franc in check. This was in light of increased haven pressure.

The amount of cash commercial banks parked with Switzerland’s monetary authority increased by 4B francs last week to 674B francs. The data showed the smallest nominal rise in a month.

Economists keep a close watch on the SNB’s sight deposit figures. This is to help gauge the scope of its foreign exchange interventions to prevent the currency from strengthening too much. Moreover, liquidity operations under the Swiss central bank’s Covid-19 facility could also be contributing to the rise in sight deposits.

The central bank has increased the intensity of interventions in recent weeks. This was according to both SNB President Thomas Jordan and fellow rate setter Andrea Maechler.

With the global economy headed for its deepest dive since the Great Depression, pressure on the franc rose, Maechler said.

In the forex exchange market, the Swiss currency has flirted with the 1.05 per euro mark in recent sessions. This is prompting speculation whether the SNB might have drawn a line in the sand there. It capped the franc’s value at 1.20 per euro between 2011 and 2015.

Maechler has denied that the 1.05 level was becoming something of an informal upper limit. She said that the SNB takes the foreign exchange situation generally into account.

The Swiss Franc: USD/CHF Up Amid Upbeat Market Mood

Meanwhile, the U.S. dollar Swiss franc pair edged higher during the early European forex trading session. It was last seen trading near the top end of its daily trading range, around the 0.9725-30 region.

The USD/CHF pair managed to reverse an early dip to the 0.9700 neighborhood, turning positive for the day. Although it lacked any strong follow-through.

The pair remained well within a broader trading range held over the past two weeks or so.  It was awaiting a fresh catalyst before the next leg of a directional move.

The prevalent risk-on mood underpinned demand for the traditional safe-haven Swiss franc. It was seen as a key factor that extended some support to the major.

Global risk sentiment was supported by optimism over the easing of lockdowns and the re-opening of economies globally.

The pair bounced around 25 pips from daily lows. Although, a subdued US dollar price action kept a lid on any further gains.

The greenback struggled to gain any meaningful traction. It largely shrugged off the Fed Chair Jerome Powell’s optimistic comments about the US economy over the weekend.

Hence, it will be prudent to wait for a sustained breakthrough in the recent trading range in the forex. That is before positioning for any meaningful intraday directional move amid absent relevant market moving economic releases from the US.

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