Swiss Franc Gains Popularity as Yen's Appeal Fades in Global Carry Trades

Investors are shifting their attention to the Swiss franc as an alternative to the Japanese yen in global carry trades. The yen's appeal has waned due to Japan's recent interest rate hike and a strengthening currency.

The benchmark interest rate in Japan is set to increase to 1.25% on July 18, marking the first additional increase in three months. Meanwhile, the yen has risen by 3.3% this month alone, with the US and Japanese authorities intervening in the market twice to induce a stronger yen.

According to Bloomberg, Russell Investment and Allianz Global Investors are paying attention to the Swiss franc as a carry-trade procurement currency. The strategy of buying the Australian dollar, which has the highest interest rate among G10 currencies, made a profit of 9% in the first half of this year but turned to a loss of 1.3% after July.

The Swiss franc, with its zero-interest rates, has emerged as an attractive alternative. Van Rue Russell, head of global bond and foreign exchange strategy at Investment, stated that 'considering monetary and exchange policies, the Swiss franc is the most attractive alternative to the carry-trade procurement currency.'