“The Swiss central bank spent 10 times as much in 2012 as it did the year before to defend the currency cap it implemented to shield the economy.
The Swiss National Bank (SNBN) bought 188 billion francs ($199 billion) in foreign currencies from a wide range of counterparties in Switzerland and abroad, the Zurich-based central bank said in its Accountability Report today. It has amassed record foreign currency reserves in its fight to protect the ceiling, and a large portion of those reserves are held in highly rated government bonds. In 2011, it spent 17.8 billion on foreign currencies.
“The SNB took care to avoid its investments having any impact on the markets and currency developments of other countries,” the central bank said in the report.
The SNB’s decision to impose a cap on the franc of 1.20 versus the euro in September 2011 has helped shield Switzerland from a downturn. The euro area, its biggest trading partner, is trying to emerge from recession.
The SNB’s foreign currency reserves fell in February to 427.5 billion francs, data published by the central bank today showed. That sum is equal to almost three quarters of Switzerland’s annual gross domestic product.
In response to a question about how much the SNB might have to spend this year to make the cap stick, SNB President Thomas Jordan, speaking to reporters in Zurich, said today that “concerning the future I can’t tell you anything.”
