Low volatility has kept the Swiss franc (CHF) and Japanese yen (JPY) in focus as funding currencies, with the franc gaining traction as a means to reduce exposure to potential yen-buying intervention. The shift reflects a preference for cheaper franc borrowing costs alongside a desire to avoid sudden moves linked to policy action from Tokyo and Washington. The dynamic has also supported the idea of using short CHF/JPY positions to express a carry-positive yen view, given the similar investment characteristics of the two currencies.
In EUR/CHF, a move towards 0.95 is framed as conditional on higher oil prices and a broad rise in interest rates. Against that backdrop, the Swiss National Bank’s (SNB) anchored zero-rate policy is positioned as a factor that could leave the franc lagging. The piece adds that it was produced with the help of an artificial intelligence tool and reviewed by an editor.
Shift in Funding Currency Strategy Toward the Swiss Franc
We expect derivative traders to shift their funding strategies from the Japanese Yen to the Swiss Franc in the coming weeks to avoid sudden regulatory disruptions. Although Tokyo has repeatedly stepped in to support the Yen with massive currency interventions, the Swiss Franc offers a much more stable alternative for cheap borrowing. By utilizing CHF as a funding currency, we can capture steady yield differentials without the threat of sudden, central-bank-driven market reversals.
For traders seeking a carry-positive way to bet on a stronger Yen, we recommend shorting CHF/JPY using options or forward contracts. With the Bank of Japan keeping its benchmark rate steady around 0.25% to 0.50% and the Swiss National Bank holding its own policy rate anchored, the yield spread remains highly predictable. Historical data shows that when both currencies act as safe havens, shorting CHF/JPY minimizes downside while capitalizing on Tokyo’s intervention threats.
EUR/CHF Outlook and Macro Triggers
Meanwhile, we should monitor EUR/CHF closely, as a move toward the 0.9500 level will likely require a resurgence in energy markets. Current energy data shows Brent crude oil hovering around $75 to $80 a barrel, but a push back toward higher levels paired with rising global bond yields is needed to weaken the Franc further. If these macro triggers align, we advise buying EUR/CHF call options to capture the upward breakout.
