Swiss National Bank Elevates Euro Holdings Above US Dollar for First Time Since 2020

SNB Realigns Foreign Currency Reserves

The Swiss National Bank (SNB) has undertaken a notable shift in its foreign currency reserve strategy, with the euro's share now exceeding that of the US dollar for the first time since 2020. Data from the April-June quarter of 2025 reveals that the euro now accounts for approximately 39% of the SNB's foreign assets, while the US dollar's share stands at around 37%. This strategic adjustment reflects the central bank's ongoing efforts to manage the Swiss economy amidst evolving global financial dynamics.

Strategic Rationale Behind the Shift

The SNB's decision to increase its euro holdings is primarily attributed to its long-standing battle against an overvalued Swiss franc and the need to manage potential deflationary risks. During the second quarter of 2025, the SNB purchased over 5 billion Swiss francs worth of foreign currency, with the majority directed towards euros. This intervention aims to stabilize the franc, which had strengthened sharply earlier in the year, putting pressure on Swiss exports and contributing to a relapse into negative annual inflation. SNB Vice President Antoine Martin underscored the bank's diversification strategy, stating, 'With a balance sheet like the SNB's, if we want to invest in a diversified way, we must allocate a significant portion of our dollar holdings to euros. We are doing this.'

Implications for Global Reserve Trends

This rebalancing of reserves by a major central bank like the SNB, which manages one of the world's largest foreign exchange reserves, could signal broader implications for global currency markets. Historically, central banks have maintained substantial proportions of US dollars in their reserves. The SNB's pivot towards the euro suggests a potential re-evaluation of dollar-heavy portfolios by other central banks, which could influence capital flows and the dollar's long-term dominance. Analysts are closely monitoring whether this represents an isolated event or the beginning of a new trend in international reserve management.

Official Stance and International Relations

The shift in the SNB's reserve composition comes amid existing trade tensions between Switzerland and the United States, with the US having previously imposed tariffs on Swiss goods. In a rare joint statement, the SNB, the Swiss Finance Ministry, and the U.S. Treasury recently affirmed that no party is targeting exchange rates for competitive advantage. This statement emphasized that foreign exchange market interventions remain an important monetary policy instrument for the SNB in ensuring appropriate monetary conditions and price stability, while also highlighting the sensitivity of such interventions in international trade discussions.