Swiss Franc Still One of Worst Performing Currencies28 May 2021
The Swiss franc has regained its ground recently versus Euro after weak Q1, but still it remains one of the worst performing currencies of 2021. Two big banks see buying opportunity on EUR CHF exchange rate.
One of Worst Performing Currency
The Swiss franc has recently made up for its first quarter loses versus, among other, Euro, and according to analysts of UBS and Goldman Sachs now it is the good opportunity to sell Swiss francs and buy euros. The Swiss currency is still the second worst performing currency of this year, but by lesser margin than just a couple of weeks before. The reverse trend is triggered by a general sentiment of rebounding of currencies on a global market. However, analysts are puzzled as to why this safe-haven currency is now trading stronger than the Euro or US Dollars. One explanation is that in the Q1 CHF was depreciated too much after investors used it as funding currency in real exchange rates sell off, and it just came back to its normal, strong value.
Experts at both UBS and Goldman Sachs are recommending clients to sell Swiss francs and buy euros now as there is progress in vaccination program in Eurozone and economies are expected to recover over summer. Investors can now take advantage of EUR/CHF exchange rate which has target of 1.14 according to banking analysts. Swiss franc should be soon again used as funding currency as sold for the Euro and other currencies that offer more attractive price return and better yields.
Swiss Franc exchange rate under pressure
For the first quarter of this year CHF exchange rate remained under pressure, together with the Eurozone’s currency, when the US Dollar and the Canadian Dollars were on the rise. Now the mood has shifted, and the European economies are growing when momentum in US or Canada has stuck. This should support the Euro, but for some reason it is CHF that is getting stronger. Looking at any analysis one should expect Swiss franc to be weaker just now, but it remains strong, in contrary to all outlooks. According to experts it might be caused by Swiss who refuse to move capital abroad and a significant spike in domestic asset holdings. Also, this currency has great funding power due to record low interest rates imposed by Swiss National Bank, of minus 0.75%, that made it cheap to borrow and sold. In addition, such low rate means Swiss assets are unattractive to foreign investors. At the same time the SNB eagerness to intervene on foreign exchange market to stop CHF price from getting overvalued and reach inflation target made Swiss exchange rate unproductive for many investors. It is worth to notice that these interventions did not help reaching 2% inflation target, that has been out of sight for decades, and the main reason for that is the constantly overpriced CHF.