According to OCBC analysts Sim Moh Siong and Christopher Wong, the Swiss Franc (CHF) has weakened in recent months, approaching their year-end EUR/CHF target of 0.94, and is now considered a preferred funding currency for carry trades due to its soft profile [1]. The CHF is noted as the worst-performing G10 currency against the USD so far in the third quarter of 2026 [1]. This weakness is attributed to the Swiss National Bank's (SNB) dovish policy stance, with expectations that the SNB will keep policy rates at zero for the remainder of the year [1].
Domestic inflation in Switzerland remains subdued and below the midpoint of the SNB's 0-2% price stability range, while near-term imported inflation risks are limited. Although the recent depreciation of the CHF could eventually lift imported inflation, OCBC analysts believe this impact will not be felt for at least another two quarters [1].
Growth signals in Switzerland are described as mixed, with strength in the pharmaceutical sector contrasted by softer industrial activity and weaker consumer-facing earnings. This mixed outlook provides little justification for a more hawkish policy stance from the SNB [1]. The dovish SNB, combined with potential intervention risks in the Japanese Yen (JPY), has further strengthened the case for using CHF as a funding currency in carry trades [1].
CONCLUSION
The Swiss Franc's continued weakness is underpinned by the SNB's dovish stance and subdued inflation outlook, making it attractive for carry trades. With policy rates expected to remain at zero and mixed economic signals, CHF softness is likely to persist, impacting its performance against major currencies.