Analysis:Investors set sights on Swiss franc for popular carry trades after yen intervention

A weaker Swiss franc may result from a rare U.S.-Japanese intervention to support the yen, benefiting Swiss companies and policymakers, according to recent analysis. The franc is 12% stronger against the euro compared to five years ago due to Switzerland's strong current account surplus, stable finances, low inflation, and safe-haven inflows.

Its strength has made Swiss exports more expensive, impacting economic growth. The yen and franc are influenced by the foreign exchange carry trade, weakening when investors borrow in these currencies with low interest rates to buy higher-yielding assets elsewhere, often emerging markets. The yen has traditionally been the currency of choice for funding such trades, but traders are now alert to potential further intervention, leading to a shift towards the Swiss franc.

Analysts and investors anticipate this trend to continue if the U.S. and Japan can engineer a stronger Japanese currency.