UBS Sees Dollar-Franc Support Amid Wide Interest Rate Differentials

UBS Switzerland AG has weighed in on the Swiss National Bank's recent decision to keep its policy rate unchanged. According to the bank, this move supports the dollar against the franc through wide interest rate differentials.

Constantin Bolz and Clémence Dumoncel, UBS strategists, noted that the SNB did not adopt an overly hawkish tone at its meeting. This is despite a slight increase in Swiss inflation from 0.4% to 0.8% year over year in August.

UBS economists now expect two SNB rate hikes in March and June 2027, with the first increase brought forward from mid-2027. The bank believes that this favorable carry backdrop should limit sustained Swiss franc appreciation before year-end.

The forecast for USDCHF remains at 0.81 for December and 0.79 for March, with near-term risks skewed to the upside. UBS also expects USDCHF to trend lower over the medium term as Fed support fades and the SNB begins tightening.