Swiss Franc Gains Traction in Carry Trades After Yen Intervention

The Swiss franc is gaining attention as a potential funding currency for popular carry trades after the rare U.S.-Japanese intervention to prop up the yen.

The franc's strength has long been a concern for Switzerland, making its exports more expensive and squeezing economic growth. However, analysts say its persistent current account surplus, sound public finances, low inflation, and safe-haven inflows are driving its value.

With borrowing costs pinned down by the Swiss National Bank at 0%, the franc stands out as an attractive alternative to the Japanese yen, which has a rate of 1%. BofA's head of global G10 FX strategy Adarsh Sinha recommends selling the Swiss franc against the yen, targeting 190 yen per franc.

While some analysts are cautious about investing in the franc due to its volatility, others see it as a viable option for funding carry trades. ING's global head of markets Chris Turner notes that the Japanese want a stronger yen and the Swiss want a weaker franc, making it 'sense' to shift towards the franc.