SNB may have intervened less in May despite reserve rise: analysts

The Swiss National Bank appeared to dial back its foreign currency interventions in May, analysts said on Tuesday, as the central bank prepares for increased market turbulence surrounding Britain's vote on EU membership. The SNB is due to give its next monetary policy assessment on June 16. The SNB's currency reserves rose in May by 14.2 billion francs to 602.063 billion Swiss francs ($622.42 billion) from 587.879 billion francs in April, according to data released on Tuesday.
Despite the rise, the level of SNB currency purchases may have been lower than in previous months, economists said. The SNB seemed to have bought foreign currency in the range of 2 billion to 4 billion francs, said Markus Schmieder, an economist at Wellershoff & Partners, a Zurich-based consultancy. He said the majority of the reserve rise was a translation effect as the franc weakened versus the dollar, which makes up 33 percent of the SNB's foreign currency holdings.
Schmieder estimated the bank had intervened in the range of 5 billion to 7 billion francs in April, and 6 billion to 12 billion francs in March. He thought the bank had been less active in the markets due to the franc trading around 1.10 against the euro, a level the SNB was relative comfortable with at present. The central bank may also have wanted to keep its options open for further intervention if necessary in June, with political uncertainty surrounding the UK's so-called Brexit vote likely to increase demand for the franc, which is often seen as a safe haven investment.
The franc hit a five-month high versus the euro on Tuesday, with some dealers citing speculation of a boost from a Polish mortgage conversion scheme and pressure on Swiss officials to intervene less. The SNB declined to comment on its foreign currency interventions. Other analysts said the increased level of foreign currency reserves showed the SNB would continue to intervene in the foreign exchange markets. Fears that Britons will vote for Brexit on June 23 are increasing pressure on the pound and the euro, which makes the franc more attractive, said Laurent Bakhtiari, a market analyst at IG Bank in Switzerland.