Options Traders Position for Weaker Swiss Franc as Risks Linger
(Bloomberg) — The Swiss franc is carrying its biggest bearish premium in over two years as options traders contend with steep US tariffs, borrowing costs at zero and the lingering threat of central bank intervention.
One-month risk reversals, a closely watched gauge of market sentiment, shifted in favor of the euro on Wednesday, hitting levels last seen in January 2023.
Positioning data from the Depository Trust & Clearing Corporation confirms the shift. Demand for euro-franc options, which pay out if the Swiss currency weakens, is now at the highest in four months, with much of the market focused on strikes at the 0.95 level or higher.
The euro has gained 1.4% against the franc so far this month, trading near 0.94 on Wednesday. The pair last traded above the 0.95 level in April.
The franc has been under pressure in August after President Donald Trump imposed the steepest levies in the developed world on Switzerland. The Swiss National Bank could respond by resuming a negative interest-rate policy or intervening directly in markets to weaken the currency.
What Bloomberg Strategists Say
“The franc is poised to decline further against the euro in the coming weeks, as lingering trade uncertainty outweighs any positivity from the latest growth data out of Switzerland. … While the SNB has expressed willingness to take rates back into negative territory if needed, the central bank has also telegraphed that the bar for such a move is rather high.”
—Ven Ram, macro strategist. Click here for the full analysis
A minority of forecasters expect the central bank to cut borrowing costs to below zero in the second half of 2025, while money markets assign a 27% probability to such an outcome. Traders widely expect the European Central Bank to keep rates unchanged for the rest of the year, leaving differentials supportive for the euro.
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