Swiss Franc Rises After Large SNB Loss

Switzerland is an important economy in Europe. The country has a GDP of more than $678 billion and a population of more than 8.4 million people. This makes it a very wealthy country. The country is known for its luxury watches and its financial sector. It is known for its industrial ability with companies such as Novartis, ABB, Nestle, UBS, and Zurich.

Yesterday, the Swiss National Bank released its financials for the past year. The bank announced that it made a loss of more than $15 billion. This was a surprise because in the previous year, the bank had made a profit of more than $50 billion. In the report, the bank blamed the surprise loss on its international holdings and a stronger franc.

Globally, the bank has a large stake in top companies. The holdings are worth more than %700 billion and are mostly in foreign companies. For example, it owns stakes in Apple, Amazon, and Microsoft worth more than $3.5 billion, $2.6 billion, and $2.3 billion respectively. Therefore, as the global stocks declined, the bank found itself in trouble. It also holds a lot of global bonds. Therefore, when markets rise and yields fall, its portfolio of assets reduce.

In the past few meetings, the bank has talked about the impacts of a stronger franc. Ordinarily, the bank prefers a weaker franc because it helps support its large exporters like Nestle.

Therefore, there is a likelihood that the bank will continue expressing its dovish views this year. The goal of this may be to push the franc down. However, this did not happen yesterday as the Fed too sounded dovish. This sent the USD/CHF pair lower as shown below. In the near-term, the pair could continue falling and find support at the 0.9700 level.

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