Switzerland’s foreign reserves fell to $702.9 billion in March, down from $725.6 billion, signaling that the Swiss National Bank (SNB) continues its careful approach in the foreign exchange market.
Bank of America (BofA) analysts explained that the decrease should not be seen as the SNB actively selling reserves. Instead, the drop is mainly due to fluctuations in currency values.
The $17 billion decline marks the largest reduction in reserves since March 2024. While it may seem like a sign of risk reduction, the decrease is mostly driven by the Swiss Franc’s rise against the US Dollar. The USD/CHF pair dropped by over 7%, which contributed to the decrease in reserves.
After factoring in these valuation changes, the foreign exchange reserves remained stable, suggesting that the SNB has not been aggressively buying foreign assets to weaken the Swiss Franc.
Analysts believe the SNB’s lack of intervention is related to the current trend of capital flows. Instead of the typical inflow of “hot money” seeking safe-haven assets, Swiss investors are shifting funds from foreign holdings, particularly in US Dollars, back into domestic investments. This movement is notable, as Switzerland holds a significant net international investment position.
The Swiss Franc’s stronger performance compared to the Japanese Yen may partly result from these repatriation flows. BofA predicts that these funds will likely flow into European asset markets, driven by large fiscal policies.
As a result, BofA forecasts a higher EUR/CHF exchange rate in the coming months.
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