Swiss reserves surge as pressure on franc grows
GENEVA—Switzerland saw its foreign currency reserves balloon by 66.2 billion Swiss francs ($69.5 billion) over the past month as the country's central bank spent heavily to prevent its currency from appreciating against the euro, according to data released Thursday.
The franc is considered a safe haven for investors concerned about the euro-zone debt crisis.
The Swiss National Bank held foreign currency reserves worth 303.8 billion francs in May, an increase of 28 percent from the 237.6 billion francs in April.
"A large part of the increase in foreign currency reserves between the end of April and the end of May can be traced to the purchase of foreign currency to enforce the minimum exchange rate," said SNB spokeswoman Silvia Oppliger.
The central bank has previously declined to specify how much it was spending to ensure the euro doesn't fall under 1.20 francs, a level it set in September after fierce lobbying from Swiss companies struggling to export to neighboring euro-zone countries.
Experts have questioned how long the SNB can keep propping up the euro without being accused of manipulating its currency. Another risk is a sudden surge in the franc when the euro floor is lifted. In recent days Swiss commentators have also revived the idea of a sovereign wealth fund for Switzerland, to ensure the SNB's reserves are invested in solid assets rather than stoking inflation.
"The current very high uncertainty and the subsequent run for safe havens is likely to trigger further interventions," said UniCredit analyst Alexander Koch. To illustrate how strong investor demand for the franc is, he cited a recent successful sale of Swiss government debt with a negative interest rate of -0.75 percent over three months.