Swiss Franc Tumbles Past 0.82 per USD Amid Rate Hike and Carry Trade Shift
The Swiss franc has hit its lowest level since May of this year, weakening past 0.82 per USD as interest rate differentials with the US widened and new carry trades emerged.
The Federal Reserve's first rate hike in three years boosted demand for the greenback, while the Bank of Japan's policy tightening and a historic intervention to support the yen reduced the franc's appeal as a funding source.
Traders are turning to alternatives offering exchange-rate stability and low borrowing costs, such as the Swiss franc, which has been sold in favor of higher-yielding assets, putting downward pressure on the currency.
The Swiss National Bank is expected to keep its policy rate at 0% through year-end, the lowest among major economies, but persistent Middle East tensions threatening energy supplies are offsetting some of this downward pressure by lifting safe-haven demand for the franc.