Swiss Franc Stages Comeback. Forecast as of 21.09.2026

Major Takeaways
- Switzerland's economy is picking up speed.
- Using the franc in carry trades is risky.
- The SNB may surprise markets in September.
- A successful test of 0.934 could provide a signal to sell EUR/CHF and USD/CHF.

Weekly Fundamental Forecast for Franc
The Swiss National Bank's reluctance to raise interest rates, combined with carry traders' search for alternatives to the yen as a funding currency, has made the franc one of the weakest currencies in the Forex market. Diverging monetary policies and a broader shift in carry-trade funding have pushed USD/CHF and EUR/CHF quotes to their highest levels since spring 2025. Is the Swiss franc really as vulnerable as it appears?

The Japanese government's efforts to curb the rise in the USD/JPY, together with the SNB's public statements indicating its reluctance to raise interest rates, have given investors a clearer picture of the policy preferences in Tokyo and Bern. The franc has consequently fallen out of favor, partly because it is being used more actively as a funding currency—a role traditionally associated with the yen.

Carry Trade Returns

Source: Bloomberg.

Much to the disappointment of Sanae Takaichi's government, reversing the trend in USD/JPY proved difficult. The pair resumed its rally as two dissenting voices emerged within the Bank of Japan, prompting markets to reassess expectations for the pace of monetary tightening. The yen weakened, and carry traders resumed using it as a funding currency. As a result, the Swiss franc regained some ground.

The Swiss National Bank's upcoming meeting could strengthen the franc. The acceleration in second-quarter GDP growth, along with the government's upward revision of its 2026 growth forecast from 0.9% to 1.7%, suggests the economy may be able to withstand higher interest rates. If so, why not tighten monetary policy? Interestingly, the derivatives market expects the SNB's policy rate to rise to 0.65% over the next 12 months. This would imply two rate hikes, with some probability of a third. Expectations for the ECB are slightly more hawkish, but markets should not underestimate the potential for a surprise.

Yield Spread Between French and German Bonds
image:https://media.beefree.cloud/pub/bfra/ewej41oi/fap/qkf/ksr/eurchf-spread-bonds-21-09-26.png]

Source: Bloomberg.

The yen has a significant advantage as a funding currency for carry trades: its exceptionally high liquidity. The Swiss franc does not offer the same level of liquidity, but it has another drawback for carry traders—its heightened sensitivity to European political risks. Against this backdrop, the widening spread between French and German government bond yields to its highest level since the 2012 debt crisis reminds us that the Swiss franc should not be underestimated.

The French government has said it intends to reduce the budget deficit. Similar fiscal consolidation efforts in the past have contributed to political instability, including resignations, and have at times weighed on the euro.

Weekly Trading Plan for EURCHF and USDCHF
The Swiss franc could benefit from these developments. A break below the 0.943 support level in the EUR/CHF could signal an opportunity to open short positions. Similarly, if the USD/CHF fails to reclaim the 0.8255 level, it could offer an opportunity to open short positions.