Stronger Swiss Franc Could Put SNB in a Difficult Position

what happened

Dow Jones Newswires reports that a significant appreciation of the Swiss franc would put the Swiss National Bank in a difficult position, according to Societe Generale’s Kit Juckes. A move by the euro below 0.90 francs, despite a shift toward using the franc rather than the yen as a funding currency, would “surely put the SNB in a bind.”

The SNB’s policy rate is 0%, while other central banks are tightening monetary policy. Juckes said the euro could decline to 0.85 francs if the central bank cannot contain a sharp rise in the franc. He called the currency “absurdly expensive,” but said the geopolitical backdrop remains supportive for the safe haven. The euro is up 0.1% at 0.9308 francs after touching a 10-week low of 0.9258 on Oct. 2, LSEG data show.

why it matters

The franc’s strength increases the policy challenge for the SNB, as geopolitical conditions support demand for the safe-haven currency while the bank’s 0% rate leaves limited room for a conventional response. EUR/CHF remains the key market gauge.

instruments