Fed at 4%, SNB at 0%: why the Swiss franc is losing ground against the dollar and the euro

A Fed-SNB Interest Rate Gap That Continues to Widen

The main driver behind the fall of the franc comes down to two decisions made eight days apart.

On 16 September, the US Federal Reserve raised its rates by 0.25 percentage points, bringing the fed funds target range to between 3.75% and 4%. It is the first hike since 2023, voted unanimously and justified by inflation that "remains elevated". Moreover, the markets are expecting more: in late September, the probability of another hike in October exceeded 70% according to CME's FedWatch tool, compared with less than 20% a month earlier.

On 24 September, the Swiss National Bank did the exact opposite: policy rate kept at 0%. With Swiss inflation at 0.8% in August and forecasts below 1% until 2028, the SNB is under no urgency to act.

The result: a gap of nearly 4 percentage points between an investment in dollars and one in francs, and of 2.5 points against the euro since the ECB also raised its deposit facility rate to 2.50% on 10 September.

• Fed: 3.75% to 4%, rising, with a hawkish bias

• ECB: 2.50% (deposit facility rate), rising

• SNB: 0%, unchanged

The gap is even more dramatic on long-term rates. The yield on 10-year US Treasuries has settled above 5%, a level unseen since 2007, whilst the 10-year Swiss Confederation bond peaks at around 0.60%. A spread of more than 4.5 points. And the SNB is increasingly alone at zero: Norges Bank has just raised its rate to 4.50%, and the Reserve Bank of Australia is preparing to hike its own.

In a world where capital seeks yield, a currency that pays nothing naturally loses its appeal. On the day of the SNB's decision, the franc fell against all major currencies except the yen, and USD/CHF hit 0.8297, its highest level of the year—more than 9% above its annual low of 0.7605.

Carry Trade: The Franc Has Become a Funding Currency

The second mechanism is more discreet, but equally powerful. With borrowing costs close to zero, the Swiss franc has become one of the preferred funding currencies for carry trade operators—a role long held by the Japanese yen, which has lost its appeal following the Bank of Japan's policy shift.

The principle: borrow in francs at near-zero rates, convert into dollars or euros, invest at 3% or 4%, and pocket the difference. Every transaction of this type amounts to selling the franc. As long as the interest rate differential persists and volatility remains contained, the selling pressure remains in place.

This explains the current paradox: even in a tense geopolitical climate, the franc is not playing its safe-haven role, because it is primarily being used as a source of cheap financing. An important nuance, however: it is against the dollar that the franc suffers most. Against the euro, the EUR/CHF pair has remained contained between 0.9378 and 0.9480 for two weeks, with the euro itself being penalised by its energy dependency.

The SNB Is Letting It Happen, and It Has Its Reasons

Just two years ago, the SNB was fighting an overly strong franc that penalised the Swiss export industry. Today, a softening franc rather suits it: it supports exporters (notably pharmaceuticals, which are driving Swiss growth, expected to be between 1.5% and 2% in 2026) and brings a little inflation back into an economy that lacked it.

The SNB still states it is willing to be active in the foreign exchange market, but this tool serves primarily to prevent a surge in the franc, not to halt its decline. This is a key point for businesses: there is no implicit "floor" to be expected from Bern.

What Could Reverse the Trend

The decline of the franc is not inevitable, and that is precisely what makes the situation risky for corporate treasuries. Three scenarios could trigger a sharp reversal:

• A major market or geopolitical shock: in the event of panic, carry trade positions unwind in a matter of days, and the franc can regain several per cent very quickly.

• A more hawkish SNB: with inflation rising on the back of energy prices, the likelihood of a Swiss rate hike in December or March has increased according to several economists.

• A pause from the Fed: if US data disappoints, rate hike expectations could vanish just as quickly as they appeared.

The issue is therefore not just the direction of the franc, but the potential magnitude of movements in both directions.

Who Is Affected, and How?

• You collect revenues in francs and pay in dollars or euros (Swiss importers, French businesses with Swiss clients): every franc collected is worth less, and your purchases cost more.

• You collect revenues in dollars or euros and pay in francs (exporters to Switzerland, companies with expenses in Switzerland): the situation is favourable to you today, but a reversal could wipe out this gain in just a few trading sessions.

• You repatriate income from Switzerland (cross-border workers, professional athletes, investors): the timing of conversion becomes critical, and waiting is not a strategy.

In all cases, the question is not about guessing the franc's next move, but knowing what exchange rate level your margin can withstand.

How to Protect Your Swiss Franc Cash Flows

• Forward contracts: you lock in the exchange rate today for a future payment or receipt. Your budget becomes predictable, regardless of how the franc moves.

• Limit orders: you set a target level, and the conversion is executed automatically once it is reached.

• Partial hedging: hedging 50% to 70% of your projected cash flows secures the essentials whilst maintaining some exposure should the market move in your favour.

• A comparison of your current FX costs: on EUR/CHF or USD/CHF, the margin charged by a traditional bank can weigh more heavily than the market movement itself.

OSolto's Support for Your CHF, USD, and EUR Flows

OSolto assists SMEs, French-Swiss businesses, and private clients in managing their international payments and foreign exchange risk. As an independent intermediary, we rely on established partners such as Ebury and CurrencyCloud to give you access to professional FX terms, with transparent fees.

In practical terms, we help you analyse your actual exposure to the Swiss franc, the dollar, and the euro, implement forward contracts or FX orders tailored to your payment schedule, and execute your international transfers with a single point of contact.

OSolto is registered with ORIAS under number 26004337 and operates within the French regulatory framework.

The Interest Rate Differential Sets the Pace, Not Reputation

The Swiss franc has not lost its safe-haven status, but it is currently overshadowed by a simpler reality: it yields nothing while the dollar and the euro do. As long as the Fed and the ECB remain hawkish against an SNB at zero, the pressure should persist, with the constant risk of a sharp reversal in the event of a shock.

For an exposed business, taking a "wait-and-see" approach is not a strategy. Get a free analysis of your Swiss franc exposure: an OSolto specialist will review your flows and recommend a tailored hedging strategy, with no obligation.

FAQ

Why is the Swiss franc falling against the dollar in 2026?

Mainly because of the interest rate differential: the Fed raised its rates to 3.75%–4% in September 2026 and the US 10-year yield exceeds 5%, whilst the SNB maintains its rate at 0% and the Swiss 10-year yield caps around 0.60%. Capital flows toward the better-yielding dollar, and the franc is used as a funding currency in carry trade strategies.

Is the Swiss franc still a safe haven?

Yes, but this role is primarily manifested during major market shocks. In periods of moderate tension, the yield differential takes precedence. In the event of market panic, the unwinding of carry trade positions can, on the contrary, cause the franc to rebound very rapidly.

Will the SNB intervene to support the franc?

The SNB states it is willing to be active in the FX market, but a weaker franc supports the Swiss export industry and brings back some inflation: there is no urgency to prop it up. Several economists believe, however, that an SNB rate hike in December or March has become more likely.

How can an SME protect itself against fluctuations in the Swiss franc?

The most common tools are forward contracts, which lock in an exchange rate for a future payment, and limit orders. Partially hedging projected cash flows secures the budget whilst maintaining flexibility.

Should you convert your Swiss francs now?

There is no universally optimal time. The decision depends on your payment schedule, your budget, and your risk tolerance. Speaking with a specialist allows you to establish a target exchange rate that aligns with your margins.

This article is provided for informational purposes only and does not constitute investment advice. The exchange rate levels mentioned are those observed at the end of September 2026 and are subject to continuous change.