Just out from the Swiss National Bank — some rather interesting FX reserve figures.
The SNB’s currency reserves dropped to CHF225.8bn ($213.6bn) in June — a decline of CHF6.3bn from May. Considering that in that month the central bank’s reserves jumped by an astounding CHF78.8bn — or CHF138.5bn in the first five months of 2010 — it seems like quite a step change in policy.
Has, as has been much discussed, the SNB drifted away from its interventionist course?
Price action — and common sense — would suggest so.
But that CHF6.3bn fall in SNB reserves might not just be due to the SNB backing away from its attempts at weakening the Swiss franc.
Says IFR Markets’ Divyang Shah:
A look through the FX reserve data shows that much of the fall can be accounted for by an increase in gold holdings. The SNB’s gold holdings at market value went from 39.1bn to 45bn showing an increase of 5.9bn (gold measured in CHF terms was actually down by 4.8% during June). Thus instead of providing an indication of the SNB’s intervention stance, what we have is interesting insight into the SNB’s portfolio allocation which interestingly is showing a bias toward holding gold. It will be interesting if over the coming months the SNB also reveals the makeup of their FX reserves and whether they are showing a bias away from both USD and EUR and more toward GBP and other currencies (commodity linked) as a means of better diversifying their reserves.
Pity those reserve managers too.
In these markets it’s seems quite easy to identify what to sell, and perhaps not that simple to find stuff to buy. There’s been talk of managers moving towards alternative currencies, especially those of emerging markets. Perhaps the SNB will like the South African rand, as well as gold?
One to watch.
Update: Right, there seems to be some confusion about the gold holdings. The SNB’s update only compares the June figure of CHF45bn with “previous data” of CHF39bn. Beat Siegenthaler of UBS says the previous data actually corresponds with March figures — not May — which means:
The ‘previous data’ point for gold was actually end-March. In contrast to the FX reserves, gold is marked-to-market on a quarterly rather than monthly basis. Between end-March and end-June, the price of gold in CHF-terms rose by around 14% which together with a few minor accounting changes results in the CHF45bn number at end-June.
So the SNB may not be shifting into gold significantly after all. (Not yet, anyway!)
Related links:
What’s up with commodity currencies? – FT Alphaville
Eurozone woes leave successful Swiss with a sore head – Gillian Tett, FT
Woolly mammoths may be on the march – FT