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CHF: CHF has room to strengthen further in the near term – MUFG

Analysts at MUFG pointed out that fears of a hard landing and a hawkish Swiss National Bank (SNB) favor further Swiss franc performance. They argue that the SNB should continue to benefit from the SNB’s desire to contain upside inflation risks by accelerating rate hikes and tolerating a stronger currency.

Key Quotes:

“The Swiss Franc is the best performing G10 currency so far this month, as it has Currencies are both sharply stronger EUR (+2.2%) and USD (+1.5%). After consolidating at higher levels for some time in July-August, it has regained momentum against our equally weighted basket of other G10 currencies. Switzerland The franc’s renewed gains coincided with a sudden hawkish SNB repricing, similar to expectations for a rate hike in June.”

“Market participants are increasingly confident that the SNB will continue to play catch-up. With The major central banks cooperated and raised interest rates by 100 basis points in the coming week (Thursday) to counter upside risks to inflation. 86 basis points of rate hikes have now been priced in. The Swiss National Bank has also strengthened against the currency since its last policy meeting in June become more forgiving as it provides another channel to help contain upside inflation risks.”

“CHF appears well-positioned to extend near-term gains, especially against other high betas G10 currency.”

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