CHF: Swiss Franc to remain stable amid global uncertainty

In the context of ongoing geopolitical and trade tensions, Rabobank analysts predict that the Swiss franc (CHF) will remain stable in the near future. The currency continues to justify its status as a key safe haven asset, attracting investors during periods of market instability.

The franc is the leader among the Big Ten currencies

The bank's experts emphasize that the Swiss franc is traditionally the leader in the ratings of the currencies of the "Big Ten" (G10) countries during crises. This reputation is based on Switzerland's fundamental advantages.:

Strong financial position: Stable economy and reliable fiscal policy create a solid foundation.

Current account surplus: Switzerland exports more goods and services than it imports, which supports a steady flow of capital into the country.

Institutional trust: The high level of trust in the country's political and financial institutions, including the Swiss National Bank (SNB), attracts investors from all over the world.

These factors make the franc a reliable tool for capital preservation, especially when global markets are uncertain.

SNB tools: a limited arsenal

Despite the strength of the franc, its excessive strengthening can harm the export-oriented Swiss economy. Rabobank notes that the Swiss National Bank has tools to curb the growth of the exchange rate, but their use is fraught with risks.

According to market participants, the probability of a return to negative interest rates this year is low. This tool, while effective in weakening the currency, has side effects for the banking sector and depositors.

Another possible option is currency intervention — the sale of francs on the open market to reduce its value. However, this method also has its drawbacks.:

Tension in relations with the United States: Active interventions may lead to the US Treasury accusing Switzerland of currency manipulation.

Risks to the SNB's balance sheet: The purchase of foreign assets in exchange for francs increases the central bank's balance sheet, making it vulnerable to fluctuations in global markets.

Forecast for USD/CHF

Given the limitations of the SNB's instruments and the continued global demand for security, Rabobank assumes that demand for safe haven assets will continue to have a significant impact on the USD/CHF currency pair. As long as the geopolitical and economic situation remains unstable, investors will seek protection in the Swiss franc, maintaining its exchange rate at a high level. This means that the potential for significant weakening of the franc in the near future is limited.