The world's third largest reserve suddenly moved to exchange dollars for euros, a precursor to a huge shock in the foreign exchange market?

The Swiss National Bank (SNB) revealed that 39% of its foreign exchange reserves were denominated in US dollars at the end of June 2025.

globalforeign exchange marketThe following statement from Antoine Martin, deputy governor of the SNB, will be closely watched on Tuesday: "With a balance sheet like SNB, if we want to diversify our investments, we have to allocate a significant portion of our dollar holdings to euros, and we are doing that."

The sudden move by the world's third largest reserve to exchange dollars for euros is a precursor to a major shock in the foreign exchange market.

The dollar index has fallen 11% from its peak this year, largely due to expectations that President Donald Trump's aggressive and disruptive trade policies will trigger central banks to diversify their reserves and reduce their reliance on the dollar, but so far few have actually made that clear.

According to SNB statistics, at the end of June 2025, its total foreign exchange reserves exceeded $1 trillion, of which the US dollar accounted for 39% and the euro accounted for 37%. As the third largest reserve asset in the world, any change in its composition would be considered significant by foreign exchange traders.

The euro fell on Wednesday, but has risen 12% against the dollar this year.

At present, Switzerland is dealing with the 39% tariff imposed by the United States, which is the highest among advanced economies. Despite the uncertainty this has created for the economy, SNB is still reluctant to cut interest rates.

That is partly because a rate cut at zero would complicate matters in the Swiss financial system, and Mr. Martin points out that the threshold for taking rates into negative territory is certainly higher than it would have been if rates had been accommodative at positive times.

Anyway,AohuiZero interest rates do not appear to be holding back the Swiss franc against the dollar, which has appreciated more than 12 per cent year-to-date, although Mr. Martin points out that this is mainly due to a weaker dollar rather than a stronger franc. A stronger franc has even made exports more difficult than US tariffs, but Mr. Martin believes the Swiss economy can weather the effects.

The sudden move by the world's third largest reserve to exchange dollars for euros is a precursor to a major shock in the foreign exchange market. (Figure 2)

EUR/USD daily chart, source: Internet

At 15:41 on August 28, Beijing time, the euro was trading at 1.1636/37 against the dollar.

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