The Swiss National Bank (SNB) announced on Thursday that it incurred a substantial loss of 15.3 billion Swiss Francs (approximately $18.83 billion) during the first half of the year.
A major contributor to this downturn was the weakening of the US Dollar, which significantly reduced the value of the SNB’s American investment holdings.
Over the six-month period ending in June, the SNB recorded a 22.7 billion Franc loss on its foreign currency positions. This was largely due to the depreciation of the Dollar, which not only diminished the market value of its assets but also eroded returns and interest payments when converted back into Swiss Francs.
The negative exchange rate effect effectively reversed gains that would otherwise have been realised on the central bank’s extensive portfolio of international investments, Reuters reports.
The results underscore how highly sensitive the SNB’s financial performance is to fluctuations in currency markets. With a massive portfolio of 727 billion Swiss Francs invested in foreign currency-denominated stocks and bonds, even modest exchange rate shifts can have a major impact on the central bank’s bottom line.
In the first half of the year, the Dollar, comprising about 37% of the SNB’s foreign exchange reserves, declined by approximately 12% against the Swiss Franc. This steep drop was driven by growing investor concerns over the United States’ mounting debt levels and heightened uncertainty surrounding President Donald Trump’s unpredictable trade policies.
The central bank's loss was partially offset by an 8.6 billion Swiss Franc valuation gain on its gold reserves, reflecting an 11% rise in gold prices over the period.
The overall financial result was broadly in line with UBS projections, which anticipated a first-half loss ranging from 10 to 20 billion Francs.
“The loss illustrates how damaging the depreciation of the Dollar is for the SNB's profits and loss and it will now be very difficult for the SNB to make a profit this year,” according to UBS economist, Alessandro Bee.