Swiss Franc Gains Attention as Yen Intervention Shifts Carry Trade Dynamics

Investors are shifting their focus to the Swiss franc for popular carry trades after recent intervention in the yen, according to analysts and experts. The weaker Swiss franc could bring relief to companies and policymakers in Switzerland who have struggled with its strength for years.

The Swiss franc has been 12% stronger against the euro than five years ago due to Switzerland's persistent current account surplus, sound public finances, low inflation, and safe-haven inflows. However, its strength has made the country's exports more expensive and squeezed economic growth.

With the yen expected to remain jumpy due to intervention risk, investors are looking at the Swiss franc as an alternative funding currency. The franc is near its weakest point in around a year against the euro, having softened about 4% from March's 11-year peak near 0.9. Rabobank has revised up its target for euro/Swiss franc to 0.95 from 0.94.

Analysts say it is hard to pin down the size of the carry trade, but point to currency short positions as a good proxy. The recent intervention has prompted an unwinding of yen short positions, pushing the outstanding number closer to those in the franc.