Swiss Franc Hits Record High Against Euro Amid Market Volatility

Swiss Franc's Rise Amid Global Market Turmoil

In the wake of the U.S. Federal Reserve's decision to hold interest rates last week, the Swiss franc has surged approximately 3.5% against the euro. Early Monday saw the franc peak at 1.0856 euros, a level not seen since January 2015, when the Swiss National Bank (SNB) removed its cap against the euro.

SNB's Stance and Potential Interventions

The SNB has remained silent on the franc's recent strength, with a spokesperson declining to comment on whether the central bank might intervene to curb the currency's appreciation. The SNB has already cut interest rates twice this year, responding to Swiss manufacturers' concerns that the strong franc is adversely affecting their export business.

Economic Insights from UBS

Maxime Botteron, an economist at UBS, noted that the recent appreciation of the franc, during a period when the SNB is reducing interest rates, could lead to foreign currency purchases by the bank. Botteron added that if policymakers are deeply concerned about the franc's strength, there remains room to further lower the benchmark rate, currently above 1.25%.

Limited Foreign Currency Purchases Expected

Botteron emphasized that any foreign currency purchases by the SNB are likely to be limited, given the central bank's existing strategies and market conditions. The focus remains on balancing the currency's strength with the broader economic impacts on Switzerland's export-driven economy.

In conclusion, the Swiss franc's significant rise against the euro amidst global market volatility highlights its role as a safe-haven currency. The SNB's response and potential interventions will be closely watched as the market continues to navigate these turbulent times.