Swiss Central Bank Reports 50B Franc Loss

The soaring value of the Swiss franc against the euro has led Switzerland’s central bank to report a first half loss of 50bn francs (£33bn).

The bank, which is owned by the Swiss federal government, said the loss could affect its ability to pay a dividend this year.

Those dividends are traditionally used to pay for public services.

Switzerland shocked markets in January when it abandoned its four-year currency peg to the euro.
The move saw the Swiss franc skyrocket in value as investors piled into the currency over fears of a renewed eurozone debt crisis despite the imminent onset of quantitative easing by the European Central Bank (ECB).

The continued strength of the Swiss franc is hurting exports from the country which are down 2.6% this year. The tourism industry has also reported fewer visitors and retailers are also struggling.

The first-half loss was almost entirely – 47.2bn francs – the result of losses on foreign exchange positions, which occurred in the weeks that immediately follow the bank’s decision to remove the currency peg against the euro.

Since ending the 1.20 francs per euro cap, the Swiss National Bank (SNB) has intervened in the currency market by buying euros to weaken the franc, which currently hovers at around 1.06 francs per euro.

via BBC

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza