Hedge funds flow into Swiss francs pushing the exchange rate with the euro close to a ten-year high.

Due to new tariffs and political uncertainties triggering safe-haven demand, the Swiss Franc has reached near-decade highs against the Euro. The Euro to Swiss Franc exchange rate reached 0.92146 on Monday, currently only about 0.2% away from the level in January 2015. In the past month, it is the only currency in the G10 group that has appreciated against the US Dollar. This is due to factors such as escalating concerns about trade protectionism, political instability in France and Japan, and new pressures facing regional banks in the US. Options trading data highlights this demand. Data from the Depository Trust & Clearing Corporation showed that trading volume for the Euro against the Swiss Franc reached its highest level since August on Friday, while trading volume for the Dollar against the Swiss Franc reached its highest level in a month. Kit Juckes, strategist at Societe Generale, stated, "Compared to the Euro and Sterling, the Norwegian Krone and Swedish Krona (with stronger growth prospects) and the Swiss Franc (with hedging characteristics) have certain advantages." He pointed out the tension between growth-oriented trading and traditional hedging trading. Hedging costs have risen to their highest levels since mid-August, with premiums for buying Swiss Franc options back to levels seen in June, as traders seek protection and a clear direction for their trades. This week will see a review of the relevant policy background. Swiss officials will release the summary report of their September interest rate meeting on Thursday, with investors closely studying the document to understand how the Swiss National Bank will respond to the situation of the currency reaching multi-year highs. With the SNB's key interest rate already at zero and a history of targeted interventions, the market will closely watch for any signs of thresholds for action and tolerance for further strengthening of the Swiss Franc. Economists have largely abandoned the idea of returning to negative interest rates (consistent with pricing in the money markets), but the central bank has multiple policy options to seek a balance between dealing with imported deflation and external shocks. Analysts at Danske Bank believe that the Swiss National Bank is more inclined towards intervention measures before considering negative interest rates. They point out that the Swiss Franc's real trade-weighted exchange rate strengthening and potential tariff measures on Swiss exports to the US could further alleviate price pressures. However, they expect the Euro to Swiss Franc exchange rate to trend downward in the next year.