The vice chairman of the Swiss National Bank, Antoine Martin, stated that the bank does not manipulate the Swiss franc. However, it might need to intervene in the foreign exchange market to keep prices stable. The current value of the franc is mostly affected by a weaker dollar.

Monetary Policy Tools

Martin pointed out that to use negative interest rates, certain conditions must be met, making them harder to implement than positive rates. While negative rates have worked in the past, they can create difficulties for banks, households, and some other financial players. There is no immediate threat of deflation, and changes in the dollar’s value are not expected to significantly affect Swiss inflation. As for gold reserves, there are no changes planned. Moreover, Bitcoin does not qualify as an asset under their guidelines. Despite previous rate cuts, markets do not anticipate any further reductions this year. With the US dollar remaining weak, the Swiss franc has strengthened significantly, recently testing the 0.8500 mark against the USD. Martin’s comments suggest that the central bank is uneasy about the rapid increase of the franc and may intervene in currency markets. This indicates there could be a limit to how much stronger the franc can get soon. For traders dealing in derivatives, this creates a chance to plan for a weaker or stable franc. Selling out-of-the-money call options on the CHF or buying call options on pairs like EUR/CHF and USD/CHF could be a smart move. The central bank has effectively set a boundary, making it risky to bet on continued strength of the franc at these levels. Recent domestic data supports this perspective. Swiss inflation for July 2025 was a modest 1.2%, allowing policymakers to focus on currency stability rather than inflation worries. Additionally, the latest manufacturing PMI data showed a slight decline, meaning a stronger franc could put more pressure on the vital export sector. This environment strongly supports the idea of possible intervention to weaken the currency.

Market Strategies

The mention of potential intervention is likely to boost implied volatility, particularly for shorter-dated options. Reflecting on the central bank’s decisive actions during the tumultuous 2022-2024 period, it’s clear that selling volatility might be risky right now. Instead, buying short-term options to hedge against or take advantage of sudden movements could be a wise strategy. Discussions about negative interest rates are not a major consideration for near-term trading since the markets are not expecting any cuts this year. We should focus instead on the currency and the increased chances of direct intervention. Therefore, organizing trades around spot price movements is advisable rather than concentrating on changes in interest rate differentials. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now