Swiss Franc Strengthens From 16-Month Low

The Swiss franc rose to 0.82 per USD, recovering from a 16-month low, as concerns over debt affordability in its European peers raised demand for save-haven assets. Elevated energy prices continue to underpin concerns over government's debt and expenditures, supporting both the greenback and Swiss franc. Providing an offsetting pressure, the franc’s appeal as a funding currency for carry trades has increased. Carry trades involve investors borrowing in a low-yielding currency to fund the purchase of a currency with higher yields, putting downward pressure on the currency. Contrasting with other central banks, the Swiss National Bank left its key rate unchanged at 0% at its September meeting, leaving borrowing costs at the world’s lowest level for more than a year while scaling back its threat of currency intervention. Although markets still expect the SNB to deliver a rate hike by year-end and roughly three hikes by the end of 2027, many analysts view these expectations as overdone.