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Source: Newsmaker.id
The Swiss franc strengthened to around 0.83 against the US dollar in trading on Thursday (October 15), reaching its strongest level in about a week. This appreciation comes amid growing expectations that global interest rates will remain higher for longer, following "hot" US inflation data that has increased the likelihood of a Federal Reserve rate hike in October.
As a safe-haven currency, the Swiss franc gains support when investors seek out more defensive assets during periods of heightened market volatility. Concerns regarding the impact of high interest rates on capital-intensive sectors—including investments in artificial intelligence (AI) infrastructure—have prompted investors to reduce their exposure to riskier assets.
However, the franc’s gains face challenges from the Swiss National Bank’s (SNB) policy stance. The Swiss central bank is expected to keep its policy interest rate at 0% through the end of the year. With Swiss interest rates remaining among the lowest in the world, the franc continues to be attractive as a funding currency for "carry trade" strategies.
Newsmaker Analysis: The Swiss franc is currently benefiting from a combination of rising market volatility and safe-haven demand; however, its upside potential may be limited should investors ramp up carry trade strategies once again. With the SNB likely to maintain low interest rates and the threat of foreign exchange intervention beginning to wane, the future direction of the franc will depend heavily on the movement of the US dollar, expectations surrounding the Federal Reserve, and the overall level of risk in global markets.
Source: Newsmaker.id