Swiss Franc Faces ‘Exceptional’ Demand Even as SNB Risk Lingers
(Bloomberg) — Investors are treating the Swiss franc as the purest safe haven on the market, brushing off the threat of central bank intervention as they seek out alternatives to the US dollar.
The franc has gained 2% against the euro and 3.5% against the dollar so far this year, reaching the strongest level in more than a decade against both currencies. That’s reinforcing the Swiss currency’s role as the refuge of choice for investors who are attracted by the country’s modest debt, stable economy and predictable policies.
Demand for the franc compared to the euro has reached “exceptional” levels, according to ING Bank NV strategists Chris Turner and Francesco Pesole, as global investors continue to build defensive exposure and hedge against dollar weakness. The US currency has shed roughly 10% since early 2025, when President Donald Trump returned to the White House and started delivering regular policy shocks including a trade war and push to takeover Greenland.
One risk for investors is that the Swiss National Bank, which has a long history of intervention in currency markets, moves to weaken the franc to curb deflationary pressures.
So far, investors don’t appear overly worried, with options markets showing traders expect more strength. Measures of sentiment such as the volatility skew show franc-bullish positioning sitting near the upper end of its range since April versus the euro and the dollar, a sign that traders continue to pay for protection against further gains for the Swiss currency.
The central bank’s other option would be to move interest rates, currently at zero, into negative territory. The mere prospect of sub-zero rates can reprice front-end expectations quickly, even if they never materialize.
Swiss National Bank President Martin Schlegel said earlier this month that introducing negative interest rates faces serious hurdles, but the central bank is ready to do so if necessary.
Inflation data due Friday could deal a setback to traders’ appetite. Economists expect that Swiss consumer prices rose just 0.1% in January compared to last year, suggesting a flat or even sub-zero reading may not be far off. That could reignite discussions on the necessity of negative interest rates.
Still, banks arguing for further franc gains say the market may be overstating the central bank’s willingness to fight the move at current levels. Switzerland had negative interest rates between 2015 and 2022, and the policy was unpopular with savers and lenders.
ING said the central bank’s room to maneuver looks constrained, with “options to cut rates into negative territory or intervene and buy FX” seen as limited. Morgan Stanley strategists led by Andrew Watrous recommend selling the euro versus the Swiss franc, as investors are “overestimating” the likelihood of intervention at current levels.
Switzerland has been on a US watchlist for potential currency manipulation since last June, and intervention would risk a rebuke from Washington. In September, the two countries issued a joint statement vowing not to manipulate currencies, with the Swiss central bank pledging to keep its monetary policy focused on price stability.
What Bloomberg strategists say…
“The SNB is averse to taking interest rates into negative territory without good reason, and a strong franc tends to have a tightening effect and damp inflation in the domestic economy. If rate cuts are off the table, the SNB may have no other option but to intervene.”
— Ven Ram, macro strategist. For the full analysis, click here.
Looking ahead, the franc could be poised for more big moves. Flow and options data suggest that traders had been positioning for 0.9150 in euro-Swiss franc, a level that’s already been reached. When that line gives way, the door could be open for further action. So-called butterflies, which depict the demand for options that pay out on wider ranges, are trading at the highest level since June.
–With assistance from Naomi Tajitsu and Bastian Benrath-Wright.
©2026 Bloomberg L.P.
