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

Investors are turning their attention to the Swiss franc as a potential asset for carry trades following a rare intervention by the U.S. and Japan to support the yen. This currency shift could provide relief to Swiss companies and policymakers who have long struggled with the strength of their local currency. The Swiss franc has been notably stronger against the euro compared to five years ago, despite recent softening, due to Switzerland's robust current account surplus, sound public finances, low inflation, and safe-haven appeal.

The yen has traditionally been a funding currency in carry trades, but its volatility has made investors cautious. Analysts and market participants are now considering rotating some of their funding positions to the Swiss franc, which offers lower volatility and more attractive funding rates compared to the yen. The Swiss National Bank may also intervene to weaken the franc if necessary.

While the yen is still popular among carry traders, the potential shift to the Swiss franc could provide a more stable funding option for investors.