The Swiss Frank strengthened about 9 percent this month. in relation to the dollar and is the strongest for a decade. In turn, the dollar has recently lost its value after the declaration of duties and as a result of the conflict of Donald Trump with the American Central Bank.
The rapid increase in Frank's value, caused by concerns about changes in the commercial policy of the US President Donald Trump, threatens the inflationary of the Swiss National Bank (SNB) of 0–2 percent.
It also harms Swiss exporters, who are also potentially threatened by 31 % duties on an expert to the USA. “The increase in the value of the Swiss franc is the last component of a poisonous cocktail for the Swiss industry,” said Jean-Pi-philippe Kohl, deputy director of the Swissm industry association.
“Companies are already struggling with poor demand abroad, the threat of huge American duties on Switzerland and uncertainty caused by the commercial policy of President Trump.”
Will the central bank take over the reins?
Interventions, not a reduction in interest rates, are probably the best SNB tool, whose main interest rate is already 0.25 percent. And it is expected to fall even more, analysts say.
Interventions carry their own risk, such as the name of Switzerland by Washington, a currency manipulator. This took place in 2020 during the first Trump administration.
Economist Ubs Maxime Botteron has not ruled out that the limited sales of Franks by SNB had already begun, but he does not expect systematic interventions.
“Interventions are more flexible than interest rate reductions – SNB may enter the market, sell some francs to alleviate the appreciation, and then stop” – he said. SNB refused to comment on the value of Frank or how he would react.
This increase in the value of the currency in relation to the euro is what political decision -makers probably observe the most, because most of the Swiss trade takes place with members of the euro area, which gives imports denominated in euros a greater impact on inflation. In 2023, 57 percent Swiss imports were invoiced in euros, compared to 13 percent. in dollars.
The head of the Swiss Re Patrick Saner macroeconomic strategy said that the intervention is likely, especially since the actual effective Frank exchange rate reached the peaks after 2015.
“The speed and scale of the recent Swiss franc rally, especially from April 2, significantly increase the chances that SNB is close to recognizing it as a” moment of “intervention” – he said.
“Although political optics matters … intervention remains likely if price stability is threatened.”
Source: Reuters
