Swiss Franc Trades See Mean-Reversion Potential Amid Undervaluation

The Swiss Franc has been identified as undervalued by BNY's Geoff Yu, who points out that it is at near one-year and 15-month lows on nominal and real effective exchange rate measures respectively.

This has led him to favor mean-reversion trades versus surplus APAC currencies such as SGD and CNY, while avoiding TWD, KRW, and CHF/JPY due to equity-hedging flows and limited relative value.

The Swiss National Bank is expected to stay on hold, which could make intervention a remote risk given the franc's weakened valuations.

Owning CHF remains expensive in carry terms, but Yu prefers carry-efficient expressions against APAC currencies to reduce the impact of the Fed on dollar pairs.