Swiss Franc Slumps as US Rates Outpace SNB

The Swiss franc is under pressure due to the widening gap between interest rates in Switzerland and the United States. The SNB has kept its policy rate at 0% since mid-2025, while the Fed has raised borrowing costs. This means investors can earn a higher return by holding US dollars than Swiss francs.

The difference is particularly important for carry trades, where investors borrow in low-yielding currencies and invest in those with higher returns. With US rates moving higher, this dynamic is strengthening the incentive to trade USD/CHF.

The SNB also faces a challenge due to the franc's role as a safe-haven currency. While geopolitical uncertainty would normally increase demand for the currency, the central bank has repeatedly warned against excessive franc strength and remains willing to intervene in foreign exchange markets if necessary.