The Swiss Franc (CHF) outperformed all G10 peers, reaffirming its role as the preferred safe-haven currency amid renewed global uncertainty. Near-zero interest rates and limited scope for aggressive easing leave the CHF structurally well supported during periods of heightened risk aversion, Commerzbank's Head of FX and Commodity Research Thu Lan Nguyen notes.

CHF outperforms on rising risk aversion

"The Swiss franc emerged from yesterday's trading as the biggest winner among the G10 currencies. It is thus proving to be the ultimate safe haven in the current (renewed) uncertain times – at least among currencies. This is by no means surprising. We have often written about what constitutes a safe haven. One important characteristic – strange as it may sound – is low or zero interest rates."

"In uncertain times, when an economic slowdown is usually expected, central banks typically lower their interest rates. The higher the key interest rates in a country, the more scope there is for interest rate cuts and the greater the potential for the currency to weaken. If interest rates are close to, or as is currently the case in Switzerland, at zero, this potential is limited. This may be one reason why gold (and other precious metals), which yields no interest, is in such high demand."

"Of course, in the event of a crisis, the Swiss National Bank could lower its interest rates into negative territory – it has at least signaled its willingness to do so. But even in Switzerland, we now know that the limit is -0.75%. And as we know from experience with the minimum exchange rate, there is also a limit to fx interventions to weaken the currency. This means that the Swiss franc is likely to remain the most sought-after currency in times of increased risk aversion."