Global safe-haven funds pour into the Swiss franc, pushing it higher and nearing intervention levels.

As a global safe-haven asset bet, the Swiss franc has recently surged significantly; after a volatile week in the exchange rate against the Euro, the market speculates that the Swiss National Bank (SNB, also known as the "Swiss Central Bank") has intervened to curb the franc's strength. The Swiss franc is experiencing its ninth consecutive weekly increase in the past 10 weeks, achieving its best consecutive rise performance in two years. Driven by safe-haven demand, the Swiss franc continues to strengthen - the attractiveness of the US dollar, Japanese yen, and euro has decreased due to US trade policies, political uncertainty in the Euro-Asian region, and global fiscal troubles, making the Swiss franc the beneficiary. Earlier this week, the Swiss franc against the euro exchange rate soared to near a ten-year high, approaching the key level of 0.92. For traders, this level means that the Swiss National Bank may be preparing to intervene in the market as it has in the past to suppress the appreciation of the Swiss franc. Currently, the Swiss franc exchange rate is 0.3% lower than the peak earlier this week. "Given the current strength of the Swiss franc, it is reasonable to speculate that the Swiss National Bank may have intervened," said Jane Foley, Head of Foreign Exchange Strategy at Rabobank, adding that the current exchange rate manipulation is likely the preferred tool for the Swiss National Bank to manage the Swiss franc exchange rate. Among major developed currencies, despite the Swiss policy interest rates being maintained at zero, the Swiss franc against the US dollar has seen the largest increase in the past month. The Swiss franc has become a prominent risk hedge tool in the currency markets, with its negative correlation with global risk sentiment approaching the strongest level since May. Nathan Thooft, Senior Portfolio Manager at Manulife Investment Management, pointed out that risk-averse investors seeking for safe-haven are more eager than ever to find alternative currencies beyond the US dollar and Japanese yen. "With these two main options excluded, the Swiss franc is left," Thooft said. "Investors will turn to currencies of countries with stable economies, good governance, and adequate liquidity in the currency market." Although some analysts were disappointed by the lack of details in the first policy meeting minutes released by the Swiss National Bank on Thursday, analysts at France's Industrial Bank (Societe Generale) stated that the current intervention risk "is at the highest level". Analysts at UBS Group AG even believe that the Swiss National Bank may have started intervening in the market to lower the Swiss franc exchange rate. The Swiss National Bank never comments on whether it intervenes in the forex market, and data proving the existence of intervention activities this quarter will also be released with a delay. The Swiss franc has previously caught the attention of US President Donald Trump. In September of this year, the US and Switzerland pledged not to manipulate their exchange rates, with the Swiss National Bank also promising to focus its monetary policy on price stability. "The US-Swiss joint statement has given the Swiss National Bank the green light to address the increasing deflationary pressures through interest rate and exchange rate policies," said Aroop Chatterjee, a strategist at Wells Fargo. He believes that the Swiss National Bank may first intervene in the forex market, and then introduce a negative interest rate policy later this year. Option markets show that unilateral actions by the Swiss National Bank could slow down the appreciation of the Swiss franc, rather than reverse its upward trend. One-month risk reversals (an indicator of the difference in demand for call and put options) show the most bullish sentiment towards the Swiss franc since May, indicating that the market believes the risk of the Swiss National Bank reintroducing negative interest rate policy is extremely low. This expectation is consistent with the language of the Swiss National Bank meeting minutes: the minutes noted that deflation is not a threat and that inflation may moderately rise in the coming months. The meeting minutes released this week touch very little on exchange rate issues. Swiss National Bank officials noted that the Swiss franc against the US dollar has strengthened, but against the euro, it is "relatively stable"; they stated that geopolitical shocks may drive funds into the Swiss franc, but the "relatively high" interest rate differential between Switzerland and major economies is offsetting this impact. However, Valentin Marinov, Head of G10 Foreign Exchange Research and Strategy at Credit Agricole, still believes that the strength of the Swiss franc "remains a continuing concern for the Swiss National Bank". Analysts at BBVA in Spain expect the Swiss National Bank to continue intervening in the 0.90-0.92 range.