Commerzbank’s Thu Lan Nguyen highlights that the Swiss Franc (CHF) has weakened since the Iran war began, helped by ultra-low Swiss inflation and the Swiss National Bank’s (SNB) persistent intervention threats. With EUR/CHF back at higher levels, she questions whether verbal warnings alone can prevent another test of 0.90 if the conflict escalates, citing past market behaviour.

Franc soft despite safe-haven profile

"The Swiss franc is among the currencies that have lost ground since the outbreak of the war in Iran. On the one hand, this is certainly due to the fact that Switzerland, with an inflation rate of just 0.1% (year-over-year), is in a comparatively strong position to handle a surge in inflation without having to tighten monetary policy extremely."

"On the other hand, the Swiss National Bank (SNB) continues to maintain a threatening stance regarding intervention. Just yesterday, Board member Petra Tschudin warned once again that the SNB stands ready to intervene against a strong franc."

"Of course, with the EUR-CHF exchange rate currently back at significantly higher levels, this does not pose an immediate threat. "

"However, it remains to be seen whether the verbal threat will be enough to prevent another test of the 0.90 mark should the Iran conflict escalate again."

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