Morgan Stanley: The Swiss Franc, Similar to Gold, Is Set to Rise

SadaNews - The Swiss franc may rise by up to 17% against the dollar, driven by growing confidence in its status as a safe haven, amid increasing uncertainty surrounding U.S. policies, according to Morgan Stanley.

Analysts led by David Adams stated in a memo that the decline in inflation in Switzerland, the stability of its financial conditions, and the safety of its assets make the franc "the closest safe-haven currency to gold." They added that these factors could push the currency to a historic record level of 0.64 against the dollar in a 'negative scenario,' compared to a trading level around 0.776 on Monday.

Adams mentioned that the Swiss franc is an "overlooked and undervalued safe-haven asset," suggesting it may experience a greater and faster rise than investors expect or is reflected in market pricing. He noted that the currency is the "most stable" among safe havens and has the best performance track record of outperformance during periods of market shocks.

Market Bets Enhance the Strength of the Swiss Franc

These predictions come at a time when hedge funds are also betting on the strength of the franc. According to the latest weekly data from the U.S. Commodity Futures Trading Commission, leveraged funds, along with other speculators, hold the largest net long positions in the Swiss currency since June, having shifted from net short positions just a week prior.

Last month, the franc rose to its strongest level against the euro and dollar in over a decade. It benefits from Switzerland's modest public debt, stable economy, and predictable policies, contrasting with the confusion surrounding policymaking in the United States, along with rising geopolitical risks.

Although the strength of the franc increases the likelihood of intervention by the Swiss central bank to weaken the currency to mitigate deflationary pressures, a growing number of economists believe that the monetary authority currently appears less inclined to face this rise.

Morgan Stanley expects the franc to continue its gains against other currencies, forecasting a rise of about 5% to a level of 0.87 against the euro, compared to around 0.91 currently.