As a result of its 1.20 floor in EUR/CHF, the SNB has been thrust into the role of manager of a huge portfolio of currency reserves when compared to the size of the Swiss economy. There was a lot of focus on the SNB this morning after an article was picked up by Business Insider which claims the SNB made a large bearish bet in EUR/JPY which is subsequently lost, big time.
Does the Swiss national bank sell euros and buy other currencies with the proceeds of its interventions? You bet. They do it every day (and starting this year, on a 24-hour basis).
Do they punt it around? Yeah, a little, but it is usually a matter of timing –holding off on purchases of currency for reserve purposes rather than actively taking a view.
The most recent data available data shows the SNB held around 9% of its assets in yen, more or less where they’ve been over the last five years.
Will the SNB lose boatloads on that 9% position? Yep. But they will make plenty in GBP, AUD, CAD, etc. That’s the nature of the beast when you are a central bank. Sometimes diversification helps a portfolio and sometimes it hampers performance. You take the good with the bad…
I wouldn’t get too alarmed by the BI post unless the SNB reserve data, which should be out in the next few days, shifts substantially.
