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Investing.com - The Swiss franc has demonstrated resilience throughout most of the year, maintaining its strength against the dollar despite the approaching July 9 deadline when the 90-day grace period for US tariffs expires, according to UBS analysis.
Since April’s significant market movements, the USD/CHF exchange rate has gradually declined below 0.80, while EUR/CHF remains range-bound between 0.930 and 0.945. The Swiss National Bank reduced interest rates by 25 basis points to 0% in June and could potentially implement negative rates if the Swiss franc strengthens further or if other central banks make additional rate cuts.
UBS analysts expect USD/CHF to trade firmly below 0.80 in the long term, though they note the Swiss franc’s total return potential against the dollar is not compelling due to the USD’s still-high carry. The rate differential between the Eurozone and Switzerland remains elevated, with the European Central Bank largely finished with its rate-cutting cycle.
The Swiss franc has recently appreciated against several currencies amid market tensions, though UBS suggests some of these gains may not be sustainable. The bank views current levels as an opportunity to gain exposure to the British pound, Scandinavian currencies, or the Australian dollar, all of which UBS expects to outperform the Swiss franc in the second half of 2025 in terms of both spot price and carry.
For investors considering USD hedging, UBS recommends it primarily to reduce volatility and manage tail risks, while cautioning that over the longer term, hedging costs are likely to exceed expected spot returns.
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