Swiss Franc Holds Near 2-Month High
The Swiss franc strengthened to 0.81 per USD, holding close to its highest level since mid-September, as a Democratic sweep raised expectations of tighter regulation of the AI buildout and lifted safe-haven demand. It could also lead to a political gridlock and raised the prospect of fiscal restraint in the US. Higher safe-haven demand could prompt traders to unwind franc-funded carry trades, which had benefited from the widening interest rate differential with the US and weighed heavily on the currency. Swiss borrowing costs have remained at the world's lowest for over a year, making the franc an attractive funding currency for higher-yielding investments. The SNB is not expected to raise rates in the near term, further supported by Chair Schlegel’s remarks which reinforced that Swiss inflationary pressures remain contained. Swiss inflation rose in October on higher energy costs and a weaker franc, although the currency's subsequent appreciation could ease imported cost pressures.
The Swiss franc strengthened to 0.81 per USD, holding close to its highest level since mid-September, as a Democratic sweep raised expectations of tighter regulation of the AI buildout and lifted safe-haven demand. It could also lead to a political gridlock and raised the prospect of fiscal restraint in the US. Higher safe-haven demand could prompt traders to unwind franc-funded carry trades, which had benefited from the widening interest rate differential with the US and weighed heavily on the currency. Swiss borrowing costs have remained at the world's lowest for over a year, making the franc an attractive funding currency for higher-yielding investments.
The SNB is not expected to raise rates in the near term, further supported by Chair Schlegel’s remarks which reinforced that Swiss inflationary pressures remain contained. Swiss inflation rose in October on higher energy costs and a weaker franc, although the currency's subsequent appreciation could ease imported cost pressures.