Swiss Franc: Funding currency weakness extends – OCBC

OCBC’s Sim Moh Siong and Christopher Wong note the Swiss Franc (CHF) remains under pressure as carry trade funding demand grows and recent Japanese Yen (JPY) intervention reinforces CHF’s role as a preferred funding currency. With inflation subdued, policy rates likely anchored at zero and the Swiss National Bank (SNB) seen comfortable with a weaker currency, they expect CHF softness to persist at least through year-end and potentially to end-2027.

CHF pressured by zero-rate stance

"CHF remains under pressure as carry trade funding demand grows and the SNB appears comfortable with a weaker currency. With inflation subdued and policy rates likely anchored at zero, CHF weakness could persist into year-end."

"Carry trade funding pressures continue to weigh on the CHF, while recent JPY intervention may have further cemented the CHF’s role as the market's preferred funding currency. As a result, the CHF is the worst-performing G10 currency against the USD so far in 3Q26."

"The downtrend received fresh support from a press report suggesting the SNB expects to keep policy rates at zero until end-2027. Although such reporting is unusual, it is broadly consistent with recent signals that the SNB is comfortable tolerating a weaker CHF for now."

"Domestically, inflation remains subdued and below the midpoint of the SNB's 0-2% price stability range. Against this backdrop, policy rates are likely to remain at zero for at least the rest of this year, reinforcing the case for continued CHF softness."