The Swiss Franc (CHF) continues to weaken, driven by growing demand for carry trade funding and reinforced by recent intervention in the Japanese Yen (JPY), which has further established the CHF as a preferred funding currency, according to OCBC analysts Sim Moh Siong and Christopher Wong [1]. The analysts note that the CHF is currently the worst-performing G10 currency against the US Dollar so far in the third quarter of 2026 [1].
A key factor behind the CHF's decline is the Swiss National Bank's (SNB) apparent comfort with a weaker currency and its commitment to a zero policy rate environment. The SNB is reportedly expected to keep policy rates at zero until the end of 2027, a stance that aligns with recent signals from the central bank and supports the ongoing downtrend in the CHF [1].
Domestically, Swiss inflation remains subdued and below the midpoint of the SNB's 0-2% price stability range, providing further justification for maintaining zero rates at least through the end of the current year [1]. This policy backdrop is seen as reinforcing continued softness in the CHF, with OCBC analysts expecting the weakness to persist at least through year-end and potentially until the end of 2027 [1].
The market implications include sustained pressure on the CHF as investors favor it for funding carry trades, given the low interest rate environment and the SNB's tolerance for a weaker currency [1].
CONCLUSION
The Swiss Franc is likely to remain under pressure due to the SNB's zero-rate policy and subdued inflation outlook. Market participants are expected to continue using the CHF as a preferred funding currency, with analysts anticipating ongoing weakness at least through year-end and possibly until 2027.