ING analysts say the Swiss Franc is gaining favor as a funding currency over JPY amid low volatility and carry trade demand.
USD/CHF dropped sharply following the US Treasury’s buy-back announcement, driven by position adjustments after a hawkish Fed narrative had supported dollar longs. The move mirrored April 2025’s market reaction but was attributed to profit-taking rather than policy concerns.
ING suggests the Treasury’s support for markets is risk-positive, keeping volatility low and sustaining carry trade interest. The Swiss Franc is increasingly preferred over the Japanese Yen as a funding currency, with EUR/CHF expected to rise toward 0.9400 after rebounding above 0.9350 this week.
The shift reflects broader market positioning, as traders adjust to evolving Fed expectations and liquidity conditions. Low volatility environments typically favor carry trades, reinforcing CHF’s role in funding strategies.