(Repeats Monday story with no change to text)
* Small rise in sight deposits indicates SNB not intervening
* Franc rises to highest level since July 2015
* Economists reckon 1.03 could be the new defense line
ZURICH, Nov 29 (Reuters) - The Swiss National Bank is no
longer standing in the way of the franc's appreciation,
according to data published on Monday, in an eye-catching change
in view of the safe-haven currency's rise to its highest against
the euro in more than six years.
The central bank's apparent stance will confound investors
who have grown used to the SNB's mantra that it would fight
tooth and nail with negative interest rates and foreign currency
purchases to restrain the Swissie.
On Monday, the franc rose to 1.0426 against the euro - its
highest level since July 2015 - fueled by the emergence of a new
COVID-19 variant, low Swiss inflation and the weakness of the
The level is not far off the 1:1 against the euro the franc
briefly reached after the SNB's last policy shift in Jan. 2015.
But the latest sight deposit data - a proxy for the SNB's
interventions - increased by only 94 million francs last week, a
fraction of the forex purchases seen last year.
One factor for the small increase could be the withdrawal by
bank customers of cash, economists say, which happens every year
in the lead up to Christmas and reduces the amount of cash the
banks hold on sight with the SNB.
"Still, an increase of less than 100 million francs shows
the SNB chose not to defend the 1.05 level," said J.Safra
Sarasin economist Karsten Junius.
The development could mean the SNB has given up restraining
the franc at its current level, because of benign Swiss
inflation and the country's robust economy.
Instead, the central bank may be storing up its firepower to
prevent rapid and large-scale appreciation instead, economists
The SNB declined to comment about Monday's data and the
economists' reaction to it.
"If the franc stays at this level of around 1.05, a little
bit above, a little bit below, the SNB won't do a lot," said
Thomas Stucki, the chief investment officer at St Galler
Kantonalbank and the former manager of the SNB's foreign
PARITY SEEN 'IN NEXT 2-3 YEARS'
"They will prevent the movement below 1.04 to 1.03" he
added. "Then they will step up interventions."
The franc was on course to eventually reach parity, Stucki
"It's clear from the development of inflation in Europe and
Switzerland the franc will become more expensive over time," he
said. "We don't expect parity to be reached next year, but we
think it will happen in the next two to three years."
Over the weekend, governing board member Andrea Maechler
said the SNB was monitoring the franc's level, although the
central bank didn't target a specific rate, she said.
Swiss inflation at 1.2% is well within the SNB's definition
of price stability and reduces the need to act.
"The long-term policy of the SNB remains in place: fight a
strong overvaluation of the Swiss franc. The question is,
however, what a strong overvaluation means," said UBS economist
Due to the much stronger inflation in the Eurozone than in
Switzerland, the fair value of the franc has climbed to 1.11 to
the euro from 1.20 last year, he said.
"From this perspective at 1.05 the franc is not strongly
over-valued anymore," said Bee. "This warrants a lower
intervention threshold for the SNB, even at this point it is
unclear where this new threshold exactly is."
The stance of the SNB will be tested in the coming days,
particularly if the omicron variant of coronavirus increases
demand for the franc.
"Now the situation is getting more complicated for the SNB,"
said ING economist Charlotte de Montpellier. "There is a risk of
a renewed flight to safety and a strengthening of the currencies
considered as safe havens, and therefore of the Swiss franc."
Until now, the SNB has done the right thing not wasting too
much money defending the franc, said J Safra Sarasin economist
"I do think they will try to halt any appreciation at 1.03.
That would be last line of defense before parity," he said.
(Reporting by John Revill, Editing by William Maclean)