Swiss franc hovers around 2011-highs

The Swiss franc traded around 0.80 per US dollar on Monday, maintaining its position near the strongest level since July 2011, as investors continued to seek refuge in the traditionally safe-haven currency amid elevated global trade tensions and policy uncertainty.

The franc has appreciated by nearly 13% against the US dollar year-to-date, making it one of the best-performing major currencies in 2025. Its strength comes despite repeated attempts by the Swiss National Bank (SNB) to temper its rise, highlighting the intensity of capital inflows into Switzerland amid mounting geopolitical and economic risks.

The latest bout of franc strength is being driven in large part by sharp and unpredictable policy shifts under the Trump administration—particularly on trade, tariffs, and national security.

With the US recently announcing a 30% tariff on goods from the European Union and Mexico, alongside prior duties on countries such as Japan, Canada, and Brazil, investors are increasingly repositioning away from risk-exposed currencies and into assets perceived as more stable and insulated from trade shocks. This has amplified demand for the Swiss franc, long seen as a hedge against global instability.

In addition to its role as a safe-haven, the franc has gained support from diminishing expectations for further SNB policy easing. A key turning point came in June, when Switzerland’s consumer price index unexpectedly rose by 0.1% year-on-year, reversing the prior month’s decline and pushing inflation back within the SNB’s 0–2% target range. This rebound in inflation suggests that deflationary pressures may be easing, reducing the need for additional stimulus and allowing the central bank to adopt a more neutral stance.

In response, market pricing for SNB policy has shifted notably. Most analysts now expect the central bank to hold its benchmark interest rate steady at 0% in its September policy meeting, and many believe it could maintain that level well into 2026, barring a significant deterioration in the external environment. This policy stability, coupled with the SNB’s cautious communication, has further anchored expectations and supported the franc’s appreciation.

However, the strong currency presents growing challenges for Switzerland’s export-oriented economy, particularly for sectors such as pharmaceuticals, machinery, and luxury goods, which rely heavily on international sales. A persistently strong franc can erode price competitiveness abroad and weigh on corporate earnings. Despite this, the SNB appears reluctant to intervene aggressively, wary of drawing criticism from trading partners and facing limited tools in a low-rate, high-liquidity environment.

In its most recent statements, the SNB has acknowledged the franc’s strength but has refrained from signaling imminent currency market interventions, instead emphasizing the importance of global cooperation and stable macroeconomic fundamentals. Officials have also pointed to Switzerland’s solid labor market, resilient domestic demand, and improving inflation outlook as reasons to remain patient on policy.

Looking forward, the franc’s trajectory will depend on a combination of global risk sentiment, US monetary and trade policy developments, and domestic inflation dynamics. Should trade tensions intensify or equity markets experience renewed volatility, the franc could continue to attract inflows, putting upward pressure on the exchange rate and testing the SNB’s tolerance for further appreciation.