Swiss Franc Hovers at 10-Year High

The Swiss franc weakened roughly 1% to around 0.78 per USD, the lowest in over a week, pressured by a stronger dollar on expectations that President Trump’s Fed nominee, Kevin Warsh, will avoid aggressive rate cuts, given his historical preference for a firmer dollar. Falling prices of precious metals also weighed on the currency, as Switzerland is a major gold refiner. At the same time, the franc’s appeal as a safe haven diminished after President Trump signaled optimism about a possible US-Iran agreement. Meanwhile, SNB President Martin Schegel recently reiterated his view that consumer prices will gradually rise in the coming quarters, with a 0.3% increase projected for this year, cementing expectations that interest rates will remain on hold for the foreseeable future.

The Swiss franc appreciated past the 0.77 per USD mark in late January, the strongest in over one decade, as a global pivot toward safe assets in combination with aversion toward other currencies that are commonly seen as safe drove markets to pile on the franc as a reliable haven. A combination of economic policy uncertainty in the US and their Treasury's signal that it will purposefully target a weaker dollar drove the greenback to weaken against G10 currencies, while pledges of expansionary fiscal policy by Japanese officials limited foreign demand for the yen. Despite its negative impact on an already muted inflation backdrop in Switzerland, bets of a rate cut by the SNB were limited, and the central bank had already pledged to limit intervention to weaken the franc. The SNB's policy rate has remained at 0% for six months, and central bankers previously expressed reservations in returning to a negative interest rate policy.

The Swiss Franc touched 0.78 against the USD, the highest since January 2015. Over the past 4 weeks, US Dollar Swiss Franc lost 0.78%, and in the last 12 months, it decreased 13.71%.