Exchange Rate Manipulation: Switzerland Is The "Old Hand"

Although President Trump of the United States has repeatedly claimed that China is a foreign exchange manipulator, Japan is actually the world's largest currency manipulator. Today, the Japanese government has bought 40% of the total issuance of Japanese government bonds to lower the yen exchange rate. In contrast, China has been supporting the appreciation rather than depreciation of the RMB in the past two years. When meeting with President Trump, Abe was very worried that President Trump would ask the Japanese government to stop manipulating the yen foreign exchange market 。

In addition, analysts pointed out that although most people think Switzerland is a country with neutral foreign exchange policy, according to the data disclosed by the Swiss National Bank recently, the Swiss government is also constantly involved in the foreign exchange market to manipulate the exchange rate.

On Thursday, the Swiss National Bank disclosed in its annual report that in 2016, the bank invested a total of 67.1 billion Swiss francs (about US $67.7 billion) in the foreign exchange market to lower the exchange rate of the Swiss franc. This figure is 20 billion Swiss francs less than the 86.1 billion Swiss francs invested by the Swiss National Bank in manipulating the foreign exchange market in 2015, and also lower than the historical record of 188 billion Swiss francs set in 2012. At the same time, in the middle of 2015, the Swiss National Bank announced the abolition of the fixed Euro and CHF 1.20 exchange rate This policy resolution caused the Swiss National Bank to lose tens of billions of Swiss francs in the foreign exchange market.

From the historical data, the Swiss National Bank has been investing a lot of money in the foreign exchange market in the past five years to try to manipulate the exchange rate of the Swiss franc. Therefore, the Swiss National Bank hopes to avoid the risk of Swiss economy falling into deflation by artificially suppressing the Swiss franc exchange rate.

In particular, at the beginning of 2015, the Swiss National Bank announced that it would abandon the constant fixed exchange rate link between the euro and the Swiss franc. In the past two years, the Swiss National Bank has been relying on negative interest rate monetary policy to cope with the growing pressure of the appreciation of the Swiss franc. Last week, the Swiss National Bank reiterated its position of adhering to these two monetary policies.

In addition, in the just disclosed annual report, the Swiss National Bank also disclosed that by the end of 2016, the total assets of the Swiss National Bank had reached a record high of 747 billion Swiss francs, higher than the level of 641 billion Swiss francs in the same period last year, and even higher than the GDP of Switzerland. At present, the assets of the Swiss National Bank are almost mainly composed of foreign exchange reserves, including gold reserves and foreign exchange investment assets. The foreign exchange reserves of the Swiss National Bank increased by 89 billion Swiss francs over the same period last year, reaching 692 billion Swiss francs. The growth of foreign exchange reserves was mainly due to the revaluation of asset values and the purchase of foreign exchange assets from other countries.

At the same time, the Swiss National Bank is the only one to admit that it is a "radical style hedge fund ”The central bank of. Therefore, SNB also disclosed the specific components of the balance sheet and the return on investment of assets in its annual report. In 2016, the return on investment of assets held by the Swiss National Bank reached 3.8%. At the same time, the gold assets and foreign exchange reserves of the Swiss National Bank Return on investment 11.1% and 3.3% respectively.

However, it is puzzling that although the gold reserve is the asset category with the highest return among all kinds of assets under the control of the Swiss National Bank, which created 11.1% investment return in 2016, and the cumulative annual investment return from 2002 to 2016 was as high as 6.5%, the Swiss National Bank has been significantly reducing the proportion of gold denominated assets in all assets in the past seven years. The proceeds from the sale of gold assets are mainly due to the purchase of US dollar denominated stocks and bonds.

In 2016, both fixed income assets and equity investments contributed considerable investment returns to SNB. However, the slight appreciation of the Swiss franc reduced the return on total assets investment of the Swiss National Bank.

At the same time, the Swiss National Bank also revealed that the bank held 20% foreign exchange reserve Assets are invested in equity assets. If denominated in Swiss francs, since the Swiss National Bank first disclosed such data in 2005, the average annualized yield of these equity assets is about 2.8%, compared with the annualized investment yield of bond assets is only 0.7%.

However, some people will be puzzled by the Swiss National Bank's public disclosure of its massive buying and holding of American stocks, and the Swiss National Bank has also made a positive response to its active stock investment strategy. The Swiss National Bank said that in the past period, investment in equity assets has made great contributions to helping the Swiss National Bank maintain and increase the value of its foreign exchange reserves. The Swiss National Bank is also actively increasing the investment proportion of equity assets.

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