ZURICH: The amount of cash commercial banks hold with the Swiss National Bank rose the most since at least March 2013 last week, suggesting the central bank intervened to keep the franc down despite scrapping a cap against the euro.
Switzerland's central bank shocked financial markets 11 days ago by abandoning the three-year-old cap on the franc, a policy it later said would have cost 100 billion Swiss francs ($112.99 billion) to defend this month alone had it been maintained.
The move sent the Swiss currency soaring against the euro and stocks plunging, a reaction the SNB said was overdone.
In the week following the removal of the cap, sight deposits surged to 365.486 billion Swiss francs last week, up from 339.614 billion francs in the prior week, SNB data showed on Monday.
The SNB can expand sight deposits through foreign exchange swaps and repurchases of its own debt.
"This increase is a very strong sign that the SNB continues to intervene in the market after abandoning the EUR/CHF exchange rate floor on Jan. 15," Credit Suisse economist Maxime Botteron wrote in a note.
Sight deposits also illustrate how inclined banks are to find an ultra-safe home for their money, despite the SNB's efforts to discourage new flows into francs by imposing an interest rate of -0.75 percent on some cash deposits.
Nerves ahead of the European Central Bank's widely expected announcement last week that it would print money to stimulate the sagging euro zone economy, may have pushed investors into francs despite the cost, online brokerage Swissquote said.
"Investors looking for a safe haven consider that -0.75 percent is still an acceptable cost considering the persisting downside risks in the euro, clearly signalling that the franc has still potential for further appreciation," Swissquote analyst Ipek Ozkardeskaya said.
The SNB said earlier this month the negative interest rates, announced in December, have already had an impact on money markets. A spokesman for the central bank did not comment on Monday.
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