Analysts urgently warn: “Do not bet against the Swiss Franc!”

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The appreciation observed in the franc in recent months has reversed slightly in recent days. The euro recently reached 0.9646 against the franc. That’s more than a two-cent difference from the record high of 0.9434 three weeks ago. The Swiss currency is also currently trading just below 0.90 against the US dollar; This is weaker than mid-October.

This does not change the fact that the Swiss currency has again performed the best among the world’s major currencies this year: the franc gained 3 percent against the euro and 2 percent against the US dollar.

Yet many investors and companies were misled by the strength of the franc. For example, telecommunications group Swisscom previously expected the euro exchange rate to be 1 franc for its sales. “That didn’t happen,” Swisscom CFO Eugen Stermetz said last week when third-quarter figures were released.

Revaluation of the franc cost Swisscom 50 million francs in sales

Swisscom currently assumes the exchange rate against the euro is 0.98 francs. Stermetz said the new assessment would cost Swisscom 50 million francs in sales. This raises the question of whether the new exchange rate assumption is sufficient.

There is uncertainty in the market about the Swiss franc and the expectation that it will gain more value. This is expressed in a statement by Samuel Zief, head of global foreign exchange strategy at JP Morgan Private Bank: “My mantra for a long time has been: Don’t bet against the Swiss franc,” Zief told Bloomberg.

The uncertainty also stems from the fact that the Swiss National Bank (SNB), which has been trying to direct the franc in the direction it wants by buying and selling foreign currency for years, has gained a reputation as a central bank whose actions are uncertain, especially in the coming period. Anglo-Saxon world. This is mainly due to the introduction and, in particular, its shocking removal, of the minimum exchange rate for the euro in 2015. The recent announcement of reducing the interest rate on banks’ current deposits with the SNB has strengthened the banks’ reputation.

The SNB strengthened the franc this year by selling foreign currencies. The aim is to keep inflation low in Switzerland. Monetary authorities achieved this; Inflation in Switzerland remained at 1.7 percent in October. The SNB is one of the few central banks in the world that can reduce inflation below its own target.

The Frank has gained value recently due to its popularity as a refuge in times of crisis and politically related shocks. The possibility of the military conflict in the Middle East spreading to other countries is why investment strategists advise against abandoning Swiss franc investments.

“We have told our clients who have a relationship with Switzerland that they should maintain their long positions in francs,” said JP Morgan Private Bank’s Zief.

Its fair value against the euro is 90 centimeters

Many economists and currency strategists have revised their forecasts due to the threat of the franc gaining value and the escalation of the Middle East war. Even Andreas König corrected his opinion. The head of global money management at asset manager Amundi actually believes the franc is overvalued.

“But in the current situation, it would be wrong to keep the currency’s weight low,” König told Bloomberg. He does not rule out the possibility that the franc will rise to 0.92 against the euro if the conflict in the Middle East escalates and involves other countries.

Thomas Gitzel, chief economist at VP Bank, currently thinks the fair value against the euro is around 90 cents — “which doesn’t mean these levels will be seen on the price charts tomorrow,” as Gitzel said in a recent interview with Cash. said. On the contrary, it shows that the franc should be expected to appreciate further in the medium term.

Schwyzer Kantonalbank’s research assumes that the SNB will intervene more strongly in the foreign exchange market again from the first quarter of 2024, thereby weakening the franc. Still, the bank sees the euro at just 0.3 francs in twelve months. A level of 0.87 francs is forecast against the dollar.

Source :Blick