Rabobank’s Senior FX Strategist Jane Foley highlights that the Swiss Franc (CHF) continues to fulfill many safe-haven criteria, including decent liquidity, a strong budget position, a current account surplus, a credible central bank, and robust rule of law. However, the persistent strength of the CHF poses challenges for the Swiss National Bank (SNB), especially given Switzerland's very low inflation rate—Swiss CPI inflation was reported at just 0.1% year-on-year, with the EU harmonised figure at 0.5% year-on-year—and a policy rate already at zero, leaving the SNB with limited options for further monetary easing [1].
Foley notes that while the SNB has maintained the possibility of returning to negative rates, this is not seen as an optimal solution. Instead, FX intervention remains a key tool, but it carries significant risks. One major concern is the potential for US Treasury scrutiny, particularly in light of recent US-Swiss trade tensions. Last year, Switzerland faced reciprocal tariffs of 39% imposed by US President Trump, which were later reduced to 15% in November after difficult negotiations [1].
Switzerland remains on the US Treasury’s Monitoring list for currency policies and practices, a position renewed earlier this year. Despite this, a joint statement in September last year between the US Treasury and Swiss authorities confirmed that neither country targets the exchange rate for competitive purposes and acknowledged that foreign exchange market interventions are an important monetary policy instrument for the SNB to ensure appropriate monetary conditions and price stability [1].
SNB Vice-President Martin reinforced this stance in comments on March 4, stating that the SNB's willingness and readiness to intervene is higher given the recent political event, echoing similar remarks made to media outlets on March 2 [1].
CONCLUSION
The Swiss Franc's safe-haven status continues to attract demand, but its strength is problematic for the SNB amid low inflation and limited policy options. While FX intervention remains a viable tool, it is constrained by US scrutiny and trade tensions. The SNB has signaled increased readiness to intervene, suggesting ongoing vigilance in managing CHF volatility.