Swiss Franc Struggles Amid Low Yield and Hawkish Central Banks

UBS believes the Swiss franc is struggling due to its low yield compared to other currencies. As rising energy prices and expectations of further monetary tightening by major central banks have widened yield differentials, the CHF has been pushed above 0.94.

The bank expects no change in the September Swiss National Bank meeting and does not anticipate a rate hike. If the SNB remains on hold while other G10 central banks maintain a hawkish stance, EUR/CHF could retest 0.96, creating an attractive opportunity to lock in higher levels, according to UBS.

The bank notes that markets have become overly hawkish on rates and that the CHF continues to face pressure because of its low yield relative to other currencies.