The Swiss franc continues to be a favored funding currency for carry trades, reflecting persistent weakness against the US dollar, according to OCBC strategists. The franc’s decline is driven by the Swiss National Bank’s historically low interest rates, encouraging investors to borrow francs and invest in higher-yielding assets. As of Friday morning, USD/CHF trended higher, with the dollar gaining ground as risk appetite supported emerging market and commodity currencies at the franc’s expense.
However, a surprise drop in US non-farm payrolls later in the same session upended that trend. The weaker-than-expected jobs report—contrary to forecasts of steady growth—pushed the dollar sharply lower, triggering a safe-haven bid for the Swiss franc. USD/CHF fell to session lows, marking a notable intraday reversal. The jobs miss lowered the probability of aggressive Federal Reserve rate hikes, which diminished the dollar’s yield advantage.
OCBC’s analysis indicates that the franc’s structural weakness as a funding currency will likely resume if global risk sentiment holds. Nevertheless, the payrolls shock underscores how swiftly currency dynamics can change when US economic data deviates from expectations. For crypto traders, the USD/CHF pair often acts as a proxy for global risk appetite; a weaker dollar generally supports risk assets like Bitcoin, while sudden franc strength signals caution.
Traders are now eyeing further Fed commentary and upcoming US data releases. The SNB’s policy stance remains a key factor—any hint of intervention or a shift in language could exacerbate franc moves. Investors holding franc-denominated assets should monitor these cross-currents closely.
