The Swiss franc is increasingly used as a funding currency in global markets even as its volatility remains unusually low, according to a note from ING published on August 22, 2026. ING strategists point to the franc's low volatility and the Swiss National Bank's accommodative stance as key factors encouraging investors to borrow in CHF and invest in higher-yielding assets. This carry trade has gained traction because calm market conditions reduce the perceived risk of sudden exchange-rate swings.
Traditionally viewed as a safe-haven currency, the franc now attracts funding demand due to its low interest rates. A growing funding role could support the currency, but ING warns that if volatility spikes or risk appetite fades, an unwinding of carry trades could trigger sharp franc appreciation and hurt Swiss exporters. The SNB has also signaled willingness to intervene in currency markets, which may further dampen volatility and reinforce the franc's appeal.
Separately, the Swiss franc edged lower against the US dollar on the same day as the greenback rebounded. Traders positioned ahead of the latest Federal Reserve FOMC minutes, which were expected to shed light on the committee's debate over inflation and the path of interest rates. A hawkish tone could extend the dollar's recovery and push USD/CHF higher, while dovish signals might allow the franc to regain ground. The policy divergence between the Federal Reserve and the Swiss National Bank remains a key driver for the currency pair.
Market participants should watch volatility indicators, SNB policy signals, and the Fed's policy trajectory. A sudden rise in volatility could rapidly unwind carry trades, while continued calm may expand the franc's funding role and influence global capital flows.
