We like SHORT SWISS FRANC across the board. We have high confidence that the Swiss National Bank (SNB) will intervene in the FX market if the Swiss Franc (CHF) appreciates further. It therefore makes a safer carry trade than SHORT JPY, with a reasonably low interest rate currently at 1.25% for CHF. On the other end of the spectrum, higher rates in many countries can offer an interesting carry trade opportunity. We like New Zealand with a rate at 5.5%.
In this speech from last April, the Vice Chairman of the governing board of the SNB explains their currency intervention policy.
"Switzerland earns every second Swiss franc abroad. For good reason, the export sector is said to be the engine of the Swiss economy. Because the exchange rate affects inflation and the economy, it plays a key role for our monetary policy. To maintain price stability, we influence monetary conditions. They are determined by interest rates and the exchange rate. To maintain appropriate monetary conditions, we set the SNB policy rate. We can also influence monetary conditions through further monetary policy measures, for example foreign exchange interventions.
The SNB policy rate remains at the core of our monetary policy implementation. It directly influences interest rates in general and – indirectly – the exchange rate. If necessary, we intervene in the foreign exchange market. This influences the exchange rate directly. "
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