By John Revill

ZURICH (Reuters)

The Swiss franc’s rapid appreciation amid U.S. policy uncertainty could prompt the Swiss National Bank (SNB) to intervene soon, as Swiss industry hopes to mitigate the currency’s surge that threatens a tariff-affected sector.

The franc has gained roughly 9% against the dollar in April, making it set for the largest monthly gain since the 2008 financial crisis. Last week, it reached its highest point since January 2015, following the SNB’s decision to eliminate its minimum exchange rate.

In April, the Swissie rose 2.6% against the euro, nearing its strongest level in over a decade. The currency’s surge, driven by worries over U.S. President Donald Trump’s trade policies, risks jeopardizing the SNB’s inflation target of 0-2% by lowering import costs while inflation is already near zero.

Furthermore, this could harm Swiss exporters, who may be subject to 31% U.S. tariffs, as the stronger franc makes their goods more expensive abroad.

> “The rise of the Swiss franc is the final ingredient for a poisonous cocktail for Swiss industry,” stated Jean-Philippe Kohl, vice director of Swiss industry association Swissmem.

Though Swissmem has not formally called for SNB action, it would support measures to curb the franc’s ascent. Analysts suggest that interventions might be the SNB’s most effective strategy, given its key rate is already at 0.25% and projected to decrease further.

Thomas Stucki, former head of asset management at the SNB, emphasized that in times of high insecurity, interest rates are less significant to market players. A SNB intervention to weaken the currency would represent a notable shift, considering it only purchased 1.2 billion francs in forex last year and sold nearly 133 billion this year to stabilize the Swissie and combat inflation.

However, interventions come with risks, such as possible accusations from Washington of currency manipulation, as seen during Trump’s first term in 2020.

Chris Turner, ING’s global head of markets, noted that market skepticism regarding the SNB’s ability to execute large-scale foreign exchange buying contributes to the franc’s strength.

PAIN THRESHOLD?

The SNB stated this month that it does not engage in currency manipulation and acts only to enhance price stability, hinting at the possibility of reclaiming negative rates, which were unpopular during their previous implementation from late 2014 to 2022.

UBS economist Maxime Botteron speculated that limited sales of francs might already be happening, though systematic interventions remain unlikely. He noted that interventions offer greater flexibility than interest rate cuts.

The SNB declined to comment on the franc’s valuation or potential reactions. Analysts suggest that the currency’s strength against the euro is particularly concerning given the significant trade with eurozone countries—57% of Swiss imports are euro-denominated compared to 13% in dollars.

While the central bank claims not to focus on specific currency pairs, it monitors a basket of currencies and aims to achieve its inflation goals. Swiss Re’s Head of Macro Strategy, Patrick Saner, predicted intervention is likely, especially with the franc’s effective exchange rate hitting post-2015 highs.

> “The speed and magnitude of the recent Swiss franc rally… significantly raises the odds that the SNB sees this as a ‘threshold moment’ for intervention,” said Saner. “While political optics matter, intervention remains likely if price stability is at risk.”