The Swiss franc, traditionally seen as a safe-haven asset during periods of instability, has reached an 11‑year high against the dollar. As of early 2026, the currency has already appreciated by 3.5%, following a 12.7% surge in 2025. This rally is attributed to unpredictable US trade policy, doubts about the Federal Reserve’s independence, and threats of military conflicts that direct capital into traditional safe havens.

However, a stronger franc is causing challenges for the Swiss economy. As Swiss National Bank Chairman Martin Schlegel acknowledged at the forum in Davos, a rise in the currency complicates the regulator’s operations. Switzerland faces a unique problem: unlike its neighboring countries, which are contending with inflation, Switzerland risks deflation. A strengthening franc lowers import prices and puts pressure on exporters, potentially forcing the central bank to revert to negative interest rates that were lifted in 2022.

Regulators have two intervention tools at their disposal. The first is to return to negative rates, a move that would be economically painful. The second involves currency interventions, although these carry significant political risks. The Trump administration previously imposed tariffs of 39% against Switzerland, accusing the country of currency manipulation. Later, the tariffs were reduced to 15%. Any active currency interventions could provoke renewed pressure from the White House and lead to fresh sanctions, leaving the central bank caught between economic and geopolitical interests.

Analysts are skeptical about the prospects for a weaker franc. Lloyd Harris, head of fixed income at Premier Miton Investors, describes the franc as “the strongest currency on earth” in the long term, supported by the stability of the Swiss economy, gold prices, and its status as a safe haven. This suggests that pressure on the franc will persist, thereby limiting regulators’ options for weakening it.