Swiss Franc: Soft profile sustained on SNB stance – OCBC

OCBC’s Sim Moh Siong and Christopher Wong highlight that the Swiss Franc (CHF) has weakened toward their year-end EUR/CHF target of 0.94, making it a preferred funding currency for carry trades. With domestic inflation subdued and near-term imported inflation risks limited, they expect the Swiss National Bank (SNB) to keep rates at zero for the rest of the year, pointing to continued CHF softness amid mixed growth signals.

SNB policy underpins CHF weakness

"The CHF has weakened in recent months, moving closer to our year-end EUR/CHF target of 0.94. A dovish SNB, coupled with potential intervention risks in the JPY, has strengthened the case for CHF as a preferred funding currency for carry trades. As a result, the CHF is the worst-performing G10 currency against the USD so far in 3Q26."

"Near-term inflation risks remain limited. While the recent depreciation of the CHF may eventually lift imported inflation, the impact is unlikely to be felt for at least another two quarters. Domestic inflation remains subdued and below the midpoint of the SNB's 0-2% price stability range."

"Against this backdrop, we expect the SNB to keep policy rates at zero for the rest of the year, reinforcing the outlook for continued CHF softness. Growth signals also remain mixed. Strength in the pharmaceutical sector contrasts with softer industrial activity and weaker consumer-facing earnings, offering little justification for a more hawkish policy stance."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)