Swiss Franc rises to 11-year high, causing turmoil in Switzerland

Safe-haven assets are off to a strong start in 2026, with gold and silver hitting new records and the Swiss franc trading at a 10-year high amid widespread uncertainty.

But in Switzerland, policymakers are watching with concern.

of swiss franc has already risen 3.5% against the dollar this year, driven by unpredictable U.S. trade policy, questions over the independence of the Federal Reserve, and threats of U.S. military intervention in Greenland, Latin America and the Middle East.

This follows a 12.7% appreciation against the dollar in 2025. It hit an 11-year high against the dollar on Tuesday and remains close to Wednesday morning’s levels despite tapering its gains.

“Further geopolitical escalation means more uncertainty,” Swiss National Bank President Martin Schlegel told CNBC’s Karen Tso on the sidelines of the World Economic Forum in Davos, Switzerland, last week.

“This is not good for the Swiss franc or for Switzerland, because the Swiss franc is a safe-haven asset. Whenever there is uncertainty in the world, the Swiss franc appreciates and this makes monetary policy more complicated for the Swiss National Bank.”

Unlike regional powers, Switzerland suffers from sluggish price growth, and a stronger franc could put further disinflationary pressure on the country’s export-driven economy.

“The strength of the Swiss franc is partly due to the fact that demand for many Swiss exports is relatively price inelastic,” Giuliano Bianchi, co-founder of EHL Hospitality Business School’s Quantitas Institute, told CNBC.

He noted that in key sectors such as pharmaceuticals, precision manufacturing and high-value services, currency appreciation has done little to reduce external demand, weakening the exchange rate stabilization mechanism.

“This complicates the Swiss central bank’s task, as a strong franc would reduce imported inflation at a time when inflation is already under control, squeezing exporters’ profits and weighing on wages and investment,” he said.

With the country’s inflation rate at just 0.1% and the Swiss National Bank’s key policy rate at 0%, Switzerland is on the brink of disinflation and negative interest rate territory.

The SNB ended its seven-year period of negative interest rates in 2022. Negative interest rates are unpopular with savers and lenders because they eliminate earnings on savings deposits and squeeze banks’ margins and profitability.

“The bar to be negative is higher than normal, but if we need to be negative, we will be negative,” Schlegel told CNBC.

Another tool that the Swiss central bank has used in the past to cool the Swiss franc is to intervene in the foreign exchange market by selling francs and buying foreign currency.

But doing so would be risky just months after Switzerland struck a trade deal that cut tariffs from 39%, the worst of the Trump administration’s levy system, to 15%.

The Trump administration imposed the high tariffs last year as part of so-called reciprocal tariffs, which the White House said were also part of a response to other countries’ “currency manipulation and trade barriers.”

In June, the White House added Switzerland to a “watch list” of nine trading partners whose “currency practices and macroeconomic policies merit close attention.”

Just last week, in a speech at Davos, Trump spoke of how volatile he can be, saying that the tariffs on Switzerland were raised from 31% to 39% because then-Swiss President Karin Keller-Sutter “pushed me in the wrong direction.” The country will still be wary of incurring the wrath of the White House.

Lloyd Harris, head of fixed income at Premier Mitten Investors, argued that the franc’s attractiveness as a stable asset was likely to support its upward trajectory, regardless of the Swiss central bank’s policy decisions.

“From a long-term perspective, the Swiss franc is the strongest currency on the planet and is likely to remain relatively resilient this year,” he told CNBC in an email.

“The supporting factors are the gold price, Switzerland’s safe-haven status amidst geopolitical turmoil, and a sustained current account surplus. The SNB could intervene if there is too much strength, but we don’t really see any change in the Swiss franc outperforming the US dollar in the medium term.”

Claudio Suffredo, a PhD in economics and adjunct professor at Switzerland’s EHL Hospitality Business School, said recent history shows that flows into safe-haven assets can strengthen the franc even if the Swiss central bank takes measures to moderate its growth, such as cutting interest rates.

“At the same time, political sensitivities surrounding currency intervention have increased further, the Swiss central bank’s room for maneuver has become more limited, and the trade-off between price stability and growth has become more acute,” he told CNBC.

Nevertheless, Schlegel insisted at Davos that the SNB will do whatever it takes to fulfill its mission, even at the risk of incurring renewed wrath from the US government.

“We are ready to intervene in the foreign exchange market if necessary,” he said.