OCBC’s Sim Moh Siong and Christopher Wong note the Swiss Franc (CHF) remains under pressure as carry trade funding demand grows and recent Japanese Yen (JPY) intervention reinforces CHF’s role as a preferred funding currency.
With inflation subdued, policy rates likely anchored at zero and the Swiss National Bank (SNB) seen comfortable with a weaker currency, they expect CHF softness to persist at least through year-end and potentially to end-2027
CHF pressured by zero-rate stance “CHF remains under pressure as carry trade funding demand grows and the SNB appears comfortable with a weaker currency. With inflation subdued and policy rates likely anchored at zero, CHF weakness could persist into year-end.” “Carry trade funding pressures continue to weigh on the CHF, while recent JPY intervention may have further cemented the CHF’s role as the market’s preferred funding currency. As a result, the CHF is the worst-performing G10 currency against the USD so far in 3Q26.” “The downtrend received fresh support from a press report suggesting the SNB expects to keep policy rates at zero until end-2027.
Although such reporting is unusual, it is broadly consistent with recent signals that the SNB is comfortable tolerating a weaker CHF for now.” “Domestically, inflation remains subdued and below the midpoint of the SNB’s 0-2% price stability range. Against this backdrop, policy rates are likely to remain at zero for at least the rest of this year, reinforcing the case for continued CHF softness.” Author