After a huge run up this decade, the Swiss franc has lost steam against the U.S. dollar. “The Swiss was a funding currency for many years,” says Randolph Donney, analyst for Thomson Reuters. Now it’s being sold off and the money is going into the most liquid market, which is U.S. T-bills. However as yields approach zero here, the franc and stocks may benefit. Donney says the USD/CHF will trade up to 125 before correcting to 118 in January.
Jack Crooks, president of Black Swan Capital Management, says Swiss banks have enormous exposure to emerging markets and the Eastern European housing market specifically. With a global recession ramping up and emerging markets taking a beating, Crooks’ longer-term outlook for the Swiss franc is negative. The franc could test 130 easily on another leg down in the emerging world; otherwise he doesn’t expect it to get below 115, which would be a great opportunity to buy USD/CHF for the long haul.
Jason Yu, chief currency strategist at ODL Securities, says that during this flight to quality, the Japanese yen and U.S. dollar have simply been better choices, especially considering recent rate cuts in Switzerland and recessionary forecasts for the eurozone. “The [USD/CHF] had a monster run from below 96 to 120,” but that’s done for now and the franc has been consolidating between 118 and 123. In January, he expects the trend to continue to the upside.