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Geopolitical Risk · Safe Haven · SNB Intervention · Swiss Franc
The Swiss franc has opened March trading near historic highs, reaching 0.77 per US dollar and its strongest level against the euro in over a decade.
This appreciation is primarily driven by a surge in safe-haven demand amidst escalating geopolitical tensions in the Middle East, following US and Israeli strikes on Iran, the reported death of Iran’s Supreme Leader, and the effective closure of the Strait of Hormuz. Iran's retaliatory attacks have further intensified regional uncertainty. However, the franc's strength is tempered by the Swiss National Bank's (SNB) explicit readiness to intervene in currency markets to curb excessive appreciation.
SNB Vice-President Antoine Martin reiterated this stance, citing the complex geopolitical backdrop and the need to maintain price stability while protecting Switzerland's export-driven economy from a too-strong currency. Meanwhile, Swiss inflation remained subdued at 0.1% in February for the third consecutive month, staying at the lower bound of the SNB’s 0-2% target range, which adds to the central bank's caution regarding deflationary risks.
Investors are closely monitoring these dynamics, balancing the appeal of the franc as a safe haven against the potential for SNB intervention and the implications of low domestic inflation. Diplomatic overtures from Iran to the CIA have been met with skepticism, suggesting continued uncertainty.
