Swiss Franc Slips Amid BoJ Hike Expectations

DBS Group Research strategist Philip Wee notes growing downside risks in CHF/JPY as the cross failed to reclaim its February-July range of 198-204 and slipped to 193, its lowest level since December.

Wee points out that monetary policy divergence is favoring the Japanese yen over the Swiss franc. The Bank of Japan is expected to hike interest rates by 25 bps to 1.25% at its September 18 meeting, while the Swiss National Bank has no incentive to raise its 0% policy rate.

This divergence reduces the Swiss franc's yield appeal and makes it less attractive to investors. Additionally, CHF/JPY faces asymmetric FX intervention risks as Tokyo and Washington have coordinated efforts to arrest the yen's depreciation, while SNB has signaled a readiness to counter excessive CHF appreciation that threatens Switzerland's export-reliant sectors.