Synopsis: Bank of America's assessment reveals the Swiss Franc (CHF) as the strongest performer against the USD for the year, with its resilience attributed not just to safe-haven flows but to the Swiss National Bank's (SNB) strategic deterrence against selling the CHF.

Key Points:

• CHF Performance: CHF has outpaced other currencies against the USD, showcasing strength that extends beyond the typical safe-haven appeal during geopolitical uncertainty.

• Decoupling from Traditional Anchors: CHF's movements have shown an unusual disconnection from its historically predictable factors, suggesting an asymmetrical price action.

• SNB's Role: By consistently offloading foreign assets, the SNB has been using its balance sheet as a tool to influence FX rates, effectively deterring market participants from selling the CHF.

• EUR/CHF Floor Impact: The SNB's policy, reminiscent of the previous floor under EUR/CHF, has been effective in maintaining CHF's value, making a return to EUR/CHF parity unlikely without a change in SNB guidance.

• Peripheral Euro Area Spreads: The dynamics of Euro Area peripheral spreads have re-emerged as a key factor in CHF's valuation, underscoring the importance of developments outside Switzerland.

Conclusion: Bank of America concludes that the Swiss National Bank's strategic management of its foreign asset portfolio has been a critical factor in the CHF's robust performance against the USD. This approach has created a deterrent against selling the CHF, providing a bulwark that seems set to hold barring any change in SNB's communicated policies. While safe-haven buying remains a factor, the broader financial conditions in the Euro Area, especially peripheral spreads, are also influencing CHF's trajectory and merit close monitoring.