Is SNB working in the background to tame Franc?

Swiss National Bank is sitting tight on policy front but may be working background to tame Franc and most importantly failing. In recent commentaries, SNB chief Jordon said that they have no fixed franc exchange rate in mind and ready to take actions if required. Although interest rate can move even lower from current -0.75%, the bank has warned every move down comes with greater cost and SNB should proceed with caution.

However, reserves data suggest they may be working background to pop down Franc. Franc is currently trading at 0.967 against Dollar, up 0.3%, so far today. This year, Franc has strengthened 3.4% against Dollar.

In May, Forex reserves swelled to new record high of Franc 602.1 billion, up from Franc 587.9 billion in April. This rise in FX reserve and negative yields up to 20 years clearly show that the Swiss economy is seeing robust capital inflows, amid global turmoil. Yields of Swiss 30-year bond is trading just above 0.1%.

Switzerland’s FX reserve to GDP ratio reached 89%, with today’s data.