Swiss Franc Wins Battle of FX Havens With Four-Decade High Against Yen

The Swiss franc is proving to be the mightiest currency haven in a volatile year for global markets, reaching a four-decade high against its traditional rival the yen this week.

(Bloomberg) — The Swiss franc is proving to be the mightiest currency haven in a volatile year for global markets, reaching a four-decade high against its traditional rival the yen this week.

The Swissie has hit levels last seen in 1980 as investors wager that the Bank of Japan will keep its ultra-loose monetary policy unchanged Friday, a decision which may weigh on the Japanese currency. The Swiss National Bank removed negative rates last year and began its hiking cycle.

Trade is also proving to be a drag for the yen, itself a traditional currency haven, with Japan posting a deficit for a 17th straight month in March. Switzerland’s trade balance is a surplus. 

Strategists at RBC Capital Markets see the Swiss outperformance continuing should the BOJ stand pat, targeting 153.50 for the pair. The yen traded around 151.50 per Swiss franc on Tuesday. 

“We position opportunistically for our longer-term view that dollar-yen can revert to a rising trend,” a team including Elsa Lignos wrote Monday. “Risk around the US debt ceiling and the deluge of first-quarter earnings announcements, however, suggest avoiding dollar trades this week and we instead go long Swiss franc against the yen.”

The Swissie is not the only European currency on the front foot against the yen. The euro has climbed over 5% against its Japanese peer this year as traders bet on further rate rises from the European Central Bank.

For Marito Ueda, general manager of the market research department at SBI Liquidity Market Co., that dynamic means the euro could strengthen to 150 yen for the first time since the global financial crisis, even if the BOJ does tweak policy.

“At best, the BOJ will only adjust its yield curve control, so at the very least, the yen will not appreciate too much,” Ueda said. “The yen will be weakening gradually and thus the euro could break through the 150 mark.”

–With assistance from Masaki Kondo.

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