Nomura analysts expect the risk environment linked to conflict to increase upward pressure on the Swiss Franc (CHF). Inflation is described as very low and the Swiss National Bank (SNB) policy rate is 0.00%.
The analysts say the SNB’s main options to counter deflation risks from further CHF strength are a negative policy rate or intervention in foreign exchange markets. They expect FX purchases to be used if CHF appreciation continues.
SNB Chairman Schlegel is reported to have set a high threshold for returning to negative interest rates. On 2 March, the SNB said it is “in view of international developments, we are increasingly prepared to intervene in the foreign exchange market”.
The report concludes that FX intervention to limit CHF strength is more likely than another policy rate cut. The article note says it was created with the help of an AI tool and reviewed by an editor.
The current risk-on environment is pushing appreciation pressure onto the Swiss Franc, creating a familiar safe-haven flow. This mirrors the situation we saw develop during the geopolitical conflicts that began in 2022. We believe this dynamic will be a key driver for the franc in the near term.
With Swiss inflation running at a very low 1.1% as of January 2026, the Swiss National Bank has little reason to change its policy stance. Looking back at 2025, the SNB held its key policy rate at 1.50% for the final two quarters, prioritizing stability over further adjustments. The central bank’s main tool to combat excessive franc strength is not rate cuts, but direct intervention in the currency markets.
For derivative traders, this suggests a strategy of selling options that benefit from a cap on the franc’s strength. Selling out-of-the-money call options on the CHF, or buying put options on a pair like USD/CHF, are direct ways to express this view. These trades profit if the SNB steps in to prevent the franc from appreciating past a certain level.
The SNB’s stated willingness to intervene also tends to suppress currency volatility, especially in the EUR/CHF pair. We saw 3-month implied volatility in EUR/CHF remain subdued for most of the second half of 2025, often trading below 5.0%. This environment makes selling volatility through strategies like short strangles an attractive proposition, capitalizing on the currency pair staying within a defined range.
The SNB has significant capacity to act, with foreign currency reserves reported at CHF 715 billion at the end of January 2026. While down from their peak, these holdings provide more than enough ammunition to curb any unwelcome and rapid franc appreciation. This underlying credibility supports the view that large upward swings in the franc are unlikely to be sustained.
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