The Swiss National Bank bought Australian dollars as the central bank diversified its euro holdings, according to minutes of the Reserve Bank of Australia’s Aug. 7 meeting published today.
The Swiss central bank bought around 100 billion euros (120 billion francs) in May and June, with further buying likely in July, to maintain its 1.20 franc peg against the European common currency, the RBA said. A “modest amount” of the euros were converted into the so-called Aussie dollar, the minutes said.
“When they’re buying the euros they have to recycle them into fixed quantities, some of which into Aussie dollar,” said Chris Walker, a currency strategist at UBS AG in London. “It’s only a small component of their reserve base but still net leads to some euro-Aussie downside, or Aussie buying.”
The SNB introduced the franc cap in Sept. 6 after the euro area’s fiscal crisis prompted investors to pile into the currency, pushing it to near parity with the euro.
The Swiss central bank’s foreign-currency reserves swelled 11.3 percent in July to 406.5 billion Swiss francs, it said Aug. 7. Walter Meier, an SNB spokesman in Zurich, said then that “a large part” of the increase resulted from currency purchases to defend the minimum exchange rate.
The Australian dollar has strengthened 6.8 percent against the euro since the start of May. It traded little changed at 1.1826 per euro at 1:10 p.m. London time.
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