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Swiss Franc: Weekly Report

Updated: 3 days ago

Currency Movements | Another week of optimism for the global markets saw investors peek out from the safe haven Swissie (CHF). The CHF|USD pair depreciated 1.26% to 1.102, reaching a 3-month low. The volatility can be attributed to a multitude of factors including fears over US-China trade sanctions, Brexit, and the global pandemic having all eased over in recent weeks.

Investors have since jumped back into the US market after 10-year U.S Treasury yields topped 1.4% for the first time since February 2020. According to ING, these factors have undermined franc demand and the bank expects the downward direction to continue, especially given the potential for speculators to shift back into a short franc position.

Get Hedged! | Over the past 12 months, the CHF|USD pair has seen annual volatility at 6.50%, as seen on Deaglo’s spot history chat below. If your company is exposed to this pair, implementing a Cash Flow Hedging solution can reduce your annual volatility down to 1.09%. We actually wrote a paper on this which explains how hedging against foreign currency risk can improve returns and increase the reliability of cash flow predictions.

Similarly, if your fund is interested in raising capital in a foreign jurisdiction, implementing a Foreign Share Class Hedging solution can boost returns, attract foreign investors, and cut down on collateral drag.

Macroeconomic Data Front | Tuesday 23rd saw the release of the Swiss investor sentiment index, which rose by 12.3 points from the previous month to 55.5 in February 2021. This was the highest the index has been since January 2010, signaling optimism surrounding a near-term economic recovery. Despite this data, market participants were likely distracted by the surge in US Treasury yields, hovering likes moths toward a shining light.

Figure 1: Economic Sentiment Index

Upcoming events likely to influence the CHF are:

  • Q4 2020’s Non Farm Payrolls (due 26 FEB)

  • Q4 2020 GDP Growth Rate YoY (due 26 FEB)

  • February’s KOF Leading Indicators (due 26 FEB)

  • January’s Retail Sales YoY (due 01 MAR)

  • February’s Inflation Rate YoY (due 03 MAR)

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