Swiss Franc Weakens Amid Diverging Rate Outlooks
The Swiss franc weakened to 0.83 per USD, its lowest level in a week, remaining under pressure from short positions amid expectations of further monetary tightening across other major economies. Contrasting with other central bank's, the Swiss National Bank kept its key rate unchanged at 0% at its September meeting, while Vice Chairman Martin said no adjustment was currently needed, citing low and stable inflation, limited spillover risks, as the Swiss economy was working "very well". Policymakers have also scaled back threats of currency intervention. Swiss borrowing costs have remained at the world’s lowest for over a year, increasing the it’s appeal as a funding source for carry trades as interest-rate differentials with other major economies widen. As traders take short positions, the selling pressure of franc-loans weakens the currency. However, safe-haven demand amid concerns over debt sustainability in its European peers provides some support, posing a risk to carry trades.
83 per USD, its lowest level in a week, remaining under pressure from short positions amid expectations of further monetary tightening across other major economies. Contrasting with other central bank's, the Swiss National Bank kept its key rate unchanged at 0% at its September meeting, while Vice Chairman Martin said no adjustment was currently needed, citing low and stable inflation, limited spillover risks, as the Swiss economy was working "very well". Policymakers have also scaled back threats of currency intervention.
Swiss borrowing costs have remained at the world’s lowest for over a year, increasing the it’s appeal as a funding source for carry trades as interest-rate differentials with other major economies widen. As traders take short positions, the selling pressure of franc-loans weakens the currency. However, safe-haven demand amid concerns over debt sustainability in its European peers provides some support, posing a risk to carry trades.