Swiss Franc: Safe haven status versus funding role – Rabobank

Rabobank’s Senior FX Strategist Jane Foley highlights Switzerland’s strong current account and budget positions, credible central bank and governance, and high liquidity as underpinning the Swiss Franc’s safe haven status. Despite low inflation and a zero Swiss National Bank (SNB) policy rate raising questions about Swiss Franc (CHF) as a funding currency, the Foley stresses safe haven demand linked to Eurozone fiscal jitters and recent CHF outperformance.

Franc caught between haven and carry

"This, however, would at times be in conflict with the CHF’s established safe haven character."

"Over the past 5 days the CHF has been the second best performing G10 currency after the NOK. This performance provides some resolution to the debate over whether the CHF is a safe haven or a funding currency."

"The CHF is a long-established safe haven currency. Switzerland’s textbook credentials for a safe haven are strong."

"Despite Switzerland’s safe haven credentials, the country’s inflation is relatively low, and the SNB’s main policy rate is at zero."

"While there has been some talk in the market that the SNB could announce a rate hike at its next policy meeting in December, the consensus currently views this as highly unlikely given the fiscal jitters in the Eurozone and its impact on safe haven demand for the CHF."

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