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.
Swiss Franc (CHF) continues to face pressure as demand for carry trade funding increases, with recent Japanese Yen (JPY) intervention reinforcing its role as a favored funding currency. With subdued inflation and policy rates expected to remain near zero, the Swiss National Bank (SNB) appears content with a weaker currency, suggesting CHF weakness may persist through the end of the year and possibly into 2027.
OCBC analysts Sim Moh Siong and Christopher Wong have noted that "carry trade funding pressures continue to weigh on the CHF" and that "recent JPY intervention may have further cemented the CHF’s role as the market's preferred funding currency." The Swiss Franc has performed the worst among the G10 currencies against the USD so far in the third quarter of 2026.
The SNB's policy rate expectations have provided fresh support to the downtrend, with a press report indicating that the bank anticipates keeping rates at zero until the end of 2027. Domestic inflation has remained subdued and below the midpoint of the SNB's 0-2% target range, further reinforcing the likelihood of continued policy rates at zero.
The US Dollar remains defensive, with GBP/USD trading near 1.3450 in the European session, while EUR/USD maintains a range above 1.1500 as traders await the US Nonfarm Payrolls (NFP) data release. The market now eagerly anticipates the July US Nonfarm Payrolls report for a clear directional impetus.
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