Commerzbank’s Thu Lan Nguyen says the Swiss Franc has become the ultimate currency safe haven, even ahead of the Dollar and Japanese Yen. Despite Switzerland not being a reserve currency issuer or net energy exporter, repeated appreciation in risk-off episodes and limited Swiss National Bank tools to weaken CHF support further strength if Middle East tensions escalate.

Franc seen outperforming in risk-off phases

"The ultimate safe haven among currencies at present, however, is not the US dollar but - as already observed last year - the Swiss franc."

"The franc is not the world’s reserve currency, and Switzerland is not a net energy exporter. In this case, a fourth factor comes into play:"

"Safe-haven status is a self‑reinforcing characteristic. In other words, the more frequently it can be observed that a currency appreciates in times of uncertainty, the stronger this effect becomes."

"The fact that the franc is currently benefiting in particular is due to the erosion over the past year of the status of other traditional safe havens - most notably the dollar, because of erratic policy from the White House, and the Japanese yen, due to growing fiscal concerns."

"Another point argues in favor of the franc: the Swiss National Bank now has only limited means to weaken it."

"In the event of an escalation of the crisis in the Middle East, further strength in the franc would therefore be expected."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)