Swiss franc hits 17-month low against euro

The Swiss franc has reached its lowest level against the euro in 17 months, hitting an intraday high of approximately 0.947 CHF per euro. This decline is primarily driven by the growing divergence in monetary policies between the European Central Bank (ECB) and the Swiss National Bank (SNB).

The ECB has raised its deposit rate to 2.50% to combat inflation, which reached 3.3% in August, alongside rising energy costs. In contrast, the SNB has maintained its key interest rate at 0%, managing an economy with much lower inflation and periodic deflationary risks. This interest rate gap has encouraged the “carry trade,” where investors borrow in low-interest currencies to invest in higher-yielding ones, such as the euro.

While a weaker franc can benefit Swiss exports and tourism, it also increases the cost of energy and imported goods.