BNS: foreign currency purchases decreased in the second quarter (cross-border guide)

Context

At a Glance

• April through June: SNB purchases totaling 1.4 billion francs
• Previous quarter: 3.9 billion francs
• The SNB will intervene “if necessary”
• Statistics published at the end of the following quarter

Key Facts

• Institution → Swiss National Bank (SNB)
• Period → April through June
• Foreign currency purchases → 1.4 billion francs
• First three months of the year → 3.9 billion francs
• SNB statement → “if necessary”

Second-Quarter Data

From April to June, the Swiss National Bank (SNB) purchased foreign currencies worth 1.4 billion francs. This volume was lower than the 3.9 billion recorded in the first three months of the year; the comparison thus indicates a decrease in purchases on the foreign exchange market.

The statistics were published at the end of the quarter following the period under review, in accordance with the usual schedule indicated in the source. The data therefore pertains to the second quarter and not to the time of publication. The SNB does not comment on its activities in the foreign exchange market; therefore, the statistics report the amount of foreign currency purchased but do not provide an official rationale for individual transactions.

One clue comes from the latest assessment of the economic and monetary situation. The bank, led by Martin Schlegel, no longer spoke of an “increased willingness” to intervene. Instead, it merely indicated that it would intervene “if necessary.” According to experts, the reason lies in the sharp weakening of the franc. However, this remains the experts’ interpretation, distinct from an official explanation by the SNB.

Foreign exchange transactions are, along with interest rate setting, the main instrument of monetary policy employed by the central bank. For this reason, the number of purchases and the formula used in the assessment must be interpreted together: the former measures the reported volume, while the latter describes the condition specified for a potential intervention. Those who wish to track the franc-euro exchange rate can supplement their analysis with the comparatore CHF/EUR indicator.

Operational details

How to interpret the reduction in volume

The comparison between 1,4 and 3,9 billion supports a precise conclusion: in the second quarter, the volume of purchases was lower than in the first three months. On its own, it does not make it possible to quantify the value of the franc, describe an effect on a single person, or attribute to the BNS an objective that the source does not make explicit. This distinction is useful for anyone who lives or works in Switzerland and reads a monetary figure as if it were already a personal forecast.

Three levels to keep separate

The difference in wording in the monetary assessment is a second element to consider. The shift from «increased willingness» to «if necessary» does not amount to an announcement of future purchases or a decision not to intervene. The source merely indicates the condition stated in the assessment. Likewise, the experts' link to the marked weakening of the franc should not be recast as an official explanation, because the BNS does not comment on its own actions in the foreign exchange market.

The reference to interest rates also calls for caution. The source presents foreign-currency operations and interest-rate setting as the main instruments of monetary policy, but does not report an interest-rate decision for the period under consideration. A proper analysis must therefore keep the two instruments separate and not fill the missing information with an assumption.

For those following costo della vita in Svizzera, this is a practical guideline: use the news to follow monetary policy, without turning it into a measure of prices or wages that the source does not provide.

Useful tools to protect your net income

To reduce FX leakage, compare CHF-EUR exchange options and banks for cross-border workers.

Key points

A Reading Procedure

The most reliable way to analyze this news item is to separate the period, amount, comparison, and commentary. This procedure does not require adding external data: simply stick to the categories used in the statistics and monetary analysis.

A Five-Step Verification

1. Define the period. Start with the words “April through June” and treat them as a fixed time frame. Do not substitute them with the publication date, which falls at the end of the following quarter. 2. Record the amount. Report 1.4 billion francs as the value of the foreign currencies purchased by the SNB during the period. 3. Make the comparison. Compare this figure with the 3.9 billion from the first three months of the year and simply note that the subsequent volume is lower. 4. Check the wording. In the assessment of the economic and monetary situation, note the difference between “increased liquidity” and “if necessary,” without attributing to the SNB an explanation it has not provided. 5. Keep the instruments separate. Consider foreign currency purchases and interest rate setting—identified by the source as the main instruments of monetary policy—together, but do not confuse them.

The fourth check is particularly important: the SNB does not comment on its own actions in the foreign exchange market, while the reference to the significant weakening of the franc is attributed to experts. Maintaining this distinction prevents an interpretation from being presented as a decision by the institution.

The same caution applies to numerical comparisons. The two figures allow for a description of a reduction in volume, but the source does not quantify the exchange rate or indicate an individual effect. A personal worksheet can therefore contain four entries: period, purchases, comparison, and official wording. To complete your balance sheet review, use calcolatore stipendio.

Source: swissinfo.ch