ZURICH, March 2 (Reuters) - The Swiss National Bank looked to be stepping up its interventions in the foreign exchange market to stem the rise of the Swiss franc triggered by the coronavirus epidemic, data on Monday indicated.
Total sight deposits, the money commercial banks park with the SNB overnight, rose to 595.764 billion Swiss francs ($619.17 billion) last week from 592.255 billion francs in the week before.
The 3.5 billion franc increase came as the Swiss franc rose last week to its highest level against the euro in four a half years as fears about the coronavirus spread drove investors into safe-haven assets.
Deposits had risen by 2 billion francs the week before.
“The SNB is clearly intervening at the moment. I don’t think they have a lower threshold they will come in at, but they are showing the market they are present and they want to prevent too fast an appreciation of the franc,” said Credit Suisse economist Claude Maurer.
Interventions are likely to continue and could increase, he added.
The SNB will want to avoid cutting its interest rate from minus 0.75% level now, although pressure could increase to follow other central banks if they cut their own rates to prevent a downturn from the coronavirus, Maurer said.
The SNB declined to comment.
“At the moment ...interventions will remain the SNB’s first line of defence,” Maurer said.
“The franc will stay under high pressure in the current risk-off environment, and this will make the SNB alert and want to slow further appreciation.”
The vast foreign currency holdings the SNB built up during its campaign to weaken the franc helped the central bank post its second-biggest profit in 2019.
The SNB has acknowledged the increased economic risks for Switzerland from the broadening virus outbreak.
The State Secretariat for Economic Affairs (SECO) is set to lower its growth forecast when it gives an update on March 17.
SNB Vice-Chairman Fritz Zurbruegg last week said the coronavirus was fuelling investor demand for the franc, adding there could be an impact on the Swiss economy.
The central bank could cut its interest rates further if necessary, Zurbruegg said in the interview.
$1 = 0.9622 Swiss francs Reporting by John Revill; Editing by Michael Shields