Why is CHF not weaker? BoA Securities explains By Investing.com

Investing.com – The play for Swiss franc weakness had by far the biggest consensus since the start of the year, according to Bank of America Securities, but the currency failed to weaken as much as expected.

At 08:25 ET (12:25 GMT), it was trading 0.1% higher at 0.8525, up 1.3% year to date but down 0.6% over the past month.

The reasons behind the expected weakness of the Swiss franc are sound, BOA explained, given that Switzerland is a country with a historical tendency to achieve below-target inflation. It has a central bank committed to preventing significant currency appreciation and a defensive domestic asset market, all of which contribute to a country where currency weakness should be expected.

“However, to create a popular analogy, this has very much been a year of two halves: significant exchange rate weakness in the first half and a rebound in the second half,” analysts at BOA Securities said in – a note from September 3.

“The reasons for the recovery in CHF are well known and well documented and are an important reminder that CHF retains its hedging appeal,” the bank added. “Geopolitics and regime change have consistently come to the CHF’s rescue and so has been the case this year.”

Looking ahead, the US bank still sees the carry trade as a dominant factor weighing on the CHF.

“In the short term, the trend favors some upside, but we believe we are entering the selling zone ahead of the SNB’s policy decision,” BOA said, with the Swiss National Bank due to make its next call on September 26.