Safe-haven demand for the Swiss franc is rising, with the Swiss National Bank's dovish stance limiting upside, MUFG says. Sight deposit data this week is the next intervention signal.
The Swiss franc is earning its safe-haven bid this quarter as trade-war anxiety and Iran tensions push capital toward defensive currencies. That demand, however, is not translating into the kind of sustained spot squeeze a pure flight-to-safety narrative would imply. MUFG analysts argue the Swiss National Bank's policy stance is the primary limiter, actively capping the currency's upside even when risk-off flows would normally send it higher.
The Swiss franc's traditional haven premium has historically amplified moves in EUR/CHF and USD/CHF when equity volatility spikes. The mechanism is straightforward: foreign investors panic-buy francs, domestic institutions repatriate safe assets, and a currency that serves as a regional liquidity sink appreciates. The SNB has repeatedly shown it views that channel as a threat to its already-negative inflation rate, intervening directly through sight-deposit expansions to sterilise unwanted strength.
MUFG's foreign-exchange desk points to this policy anchor as the reason CHF spot has underperformed real-time haven proxies such as the Japanese yen and gold during recent escalation windows. The central bank's negative interest rate of -1.0% and its willingness to increase sight deposits at commercial banks create a two-sided deterrent: carry discourages long positioning, and the threat of intervention makes a sharp break below EUR/CHF 0.95 psychologically difficult to sustain.
For traders tracking whether the SNB is actively selling francs, the weekly sight deposit release is the most actionable real-world signal. Sight deposits capture the liquidity the central bank leaves in the banking system and jump measurably when the SNB intervenes by buying euros and creating new franc liabilities. A stable or declining sight deposit balance during a period of elevated safe-haven demand would signal the SNB is tolerating the move; an abrupt spike, conversely, would confirm active containment.
MUFG's analysis highlights this leading indicator as a faster read on official flow than lagged balance-of-payments data. The market has learned to front-run the data, parking EUR/CHF bids above 0.94 in anticipation that any dip into the 0.93 area will trigger a central bank response. That pre-positioning itself flattens the safe-haven rally and keeps the pair range-bound, even when headline risk points to a breakout.
MUFG itself carries an AlphaScala Alpha Score of 63, labelled Moderate, signaling selective institutional activity in the financial-services giant. The stock, trading in New York, provides a concurrent equity read on the yen-and-franc thesis MUFG's own strategists are discussing in the spot market.
Beyond direct intervention, the interest-rate channel reinforces the ceiling. The SNB's deeply negative deposit rate makes holding Swiss francs costly for leveraged accounts, while the eurozone's deposit rate sits at 4.0%. Carry-trade dynamics therefore push EUR/CHF higher over time, offsetting a large fraction of any safe-haven bid that would otherwise compress the cross. The accumulated negative carry means a rally in the franc requires an exceptionally persistent risk-off episode, something the market has not priced since the Ukraine invasion in 2022.
The immediate catalyst for EUR/CHF traders arrives with the next SNB sight deposit release, which will show whether last week's safe-haven bid drew an official response. If deposits are flat, the market's assumption of a tacit floor near 0.94 becomes weaker, opening the door to a test of 0.93. A large increase would affirm MUFG's view that the SNB remains proactive and would likely keep the cross anchored.
Beyond the weekly data, the upcoming Eurozone CPI print and the Swiss Q1 GDP release will define how much room the SNB has to ease further. A softer inflation read in Switzerland could prompt additional rate cuts, widening the rate disadvantage and adding to the franc's headwind regardless of the geopolitical backdrop. For traders, the pair is not simply a safe-haven tracker; it is a policy battleground where SNB psychology has at least as much weight as headline risk.
Drafted by the AlphaScala research model and grounded in primary market data – live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.