Why an end to Switzerland's gilt trip could hurt sterling

The Swiss central bank "aggressively diversified" into UK gilts in the third quarter, providing a boost to sterling, but the end of this process could be damaging to the currency, according to analysts at Nomura.

Last September the Swiss National Bank imposed a floor on the euro/Swiss franc exchange rate in a bid to stop its currency from appreciating. In committing to ensure the value of the euro does not fall below 1.20 francs, the central bank has subsequently intervened in foreign exchange markets to buy euros, accumulating large currency reserves in the process. However, quarterly figures released by the SNB this week show that its euro reserves have now returned to pre-floor levels, falling from 60% of total reserves to 48% over the period. According to analysis from Nomura, that redu...