SNB’s euro holdings rose, but it reported profit

When we speak about the demand for euro, it’s necessary to remember about such a big player as the Swiss National Bank which has accumulated more than 300 billion Swiss francs ($309 billion) of foreign currencies over the last 3 years.

According to the data released today, the SNB recorded a profit 6.5 billion Swiss francs ($6.63 billion) in the first half of 2012 as the value of its foreign currency holdings increased. This reinforces the central bank’s ability to keep EUR/CHF above 1.20.

UBS: Today’s figures of the SNB’s reserve allocation have showed that SNB’s holdings of euro increased from 51% in Q1 to 60% in Q2. EUR/USD was declining and the negative pressure on the single currency was mounting, so the SNB had to buy big amounts of single currency. At the same time, “the rise in allocations in the ‘others’ category suggests the central bank had been an active buyer of currencies including AUD, SEK, DKK, SGD and KRW, as listed by the central bank. Although their purchases may not explain all of the outperformance in currencies such as SEK and AUD, it may have encouraged other market participants to join the rush for high-quality assets.”

Analysts at Citigroup claim that the SNB will have to diminish its euro holdings at some point as its current position is extremely risky. So, even if euro gets on recovery track, there will a seller – an what a seller!