Swiss Franc nears one-year lows in nominal terms and 15-month lows in real terms, prompting mean-reversion bets versus surplus APAC currencies.
The Swiss Franc (CHF) appears undervalued on both nominal and real effective exchange rate measures, trading near one-year and 15-month lows, respectively. This undervaluation is driving expectations for a recovery, particularly against surplus Asia-Pacific currencies like the Singapore Dollar (SGD) and Chinese Yuan (CNY).
Recent weakness in CHF follows signals that the Swiss National Bank (SNB) is likely to maintain its current policy stance for an extended period. Despite clear guidance from the SNB’s conditional forecasts, market reactions to these signals have been pronounced, with global yield rises reinforcing CHF’s role as a funding currency.
Analysts suggest that the franc’s depressed valuations may reduce the SNB’s intervention risks, increasing tolerance for currency strength. However, carry costs remain high, leading to a preference for trades against SGD and CNY, where mean-reversion potential is most evident after sharp recent declines.