Swiss Franc Rises After Large SNB Loss

Source: Forex News

Switzerland is an important
economy in Europe. The country has a GDP of more than $678 billion and a
population of more than 8.4 million people. This makes it a very wealthy
country. The country is known for its luxury watches and its financial sector.
It is known for its industrial ability with companies such as Novartis, ABB,
Nestle, UBS, and Zurich.

Yesterday, the Swiss National
Bank released its financials for the past year. The bank announced that it made
a loss of more than $15 billion. This was a surprise because in the previous
year, the bank had made a profit of more than $50 billion. In the report, the
bank blamed the surprise loss on its international holdings and a stronger
franc.

Globally, the bank has a large
stake in top companies. The holdings are worth more than %700 billion and are
mostly in foreign companies. For example, it owns stakes in Apple, Amazon, and
Microsoft worth more than $3.5 billion, $2.6 billion, and $2.3 billion
respectively. Therefore, as the global stocks declined, the bank found itself
in trouble. It also holds a lot of global bonds. Therefore, when markets rise
and yields fall, its portfolio of assets reduce.

In the past few meetings, the
bank has talked about the impacts of a stronger franc. Ordinarily, the bank
prefers a weaker franc because it helps support its large exporters like
Nestle.

Therefore, there is a likelihood
that the bank will continue expressing its dovish views this year. The goal of
this may be to push the franc down. However, this did not happen yesterday as
the Fed too sounded dovish. This sent the USD/CHF pair lower as shown below. In
the near-term, the pair could continue falling and find support at the 0.9700
level.

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