Switzerland’s central bank sharply reduced its foreign currency purchases in the third quarter of 2025, signalling a shift in how policymakers are managing appreciation pressure on the Swiss franc after a volatile first half of the year. The Swiss National Bank bought just 75 million francs worth of foreign currencies during the quarter, a steep decline from more than 5 billion francs purchased in the previous three month period. Earlier intervention had been driven by heightened global uncertainty linked to aggressive US trade policy, which pushed investors toward traditional safe haven currencies. As those pressures eased and market conditions stabilised, the need for large scale intervention diminished. The sharp reduction suggests the central bank judged that the franc’s pace of appreciation had become more manageable, allowing it to step back without risking excessive tightening in financial conditions or renewed deflationary pressure.
The contrast between the second and third quarters highlights how sensitive Swiss policy actions remain to global political and trade developments. During the spring, sweeping US tariff announcements fuelled market volatility and intensified demand for the franc, forcing the SNB to intervene at its fastest pace in several years. Those pressures peaked after steep tariffs were imposed on Swiss exports before a partial resolution was reached later in the year. Since then, the franc has continued to strengthen against the dollar, rising by roughly 15 percent over 2025, reflecting broad dollar weakness rather than purely domestic factors. Against the euro, however, gains have been limited, underscoring the importance of the euro zone for Switzerland’s trade exposure and the central bank’s tolerance for bilateral currency moves that do not threaten price stability.
For policymakers, the decision to reduce foreign currency purchases also reflects the current inflation backdrop and the delicate balance between exchange rate management and monetary credibility. Swiss inflation remains at the lower end of the central bank’s target range, leaving little room for complacency if currency strength begins to drag prices lower. At the same time, sustained intervention carries political and reputational risks, particularly as global scrutiny of currency policies remains elevated. By scaling back purchases, the SNB appears to be signalling confidence that recent franc gains will not accelerate unchecked, while retaining flexibility to respond if external shocks reemerge. The move reinforces the view that currency intervention is being used tactically rather than as a permanent policy tool, closely aligned with global liquidity conditions and shifts in safe haven demand.
