Swiss National Bank closes era of foreign currency buying process

The Swiss National Bank (SNB) carried out the sale of foreign currency totaling 5 million Swiss francs ($5.1 million) as part of its market price control mechanism, known as intervention, during the second quarter of 2022. Thus, the era of large foreign currency purchases in order to curb the franc growth is over.

Since the country's central bank stopped maintaining the minimum exchange rate in 2015, Switzerland has spent 353 billion francs to acquire major currencies, including the dollar, yen and euro. The target was to keep the franc as a safe-haven currency.

The suspension of foreign currency purchases is considered the second dramatic change in the SNB's policy in recent years. It is even more noticeable amid the central bank exiting from the negative interest rates period that lasted for 8 years. This event took place last week with a view to combat reviving inflation.

"The SNB is now functioning in a new reality," claimed Elias Hafner, currency strategist at Zuercher Kantonalbank. "Notably, the Swiss central bank's desire to intervene is much lower at the moment."

The SNB has focused on controlling inflation, which reached its 29-year peak in August, shifting its attention from regulating the national currency. Despite a globally low rate of 3.5%, Switzerland's performance is outside its price stability target of 0-2% annual growth.