Yesterday was the third time this year that the USD/CHF reversed sharply from levels just above 1.00. The Swiss National Bank (SNB) could be behind the move as it wants to avoid a soft franc, economists at ING report.

What to make of USD/CHF at parity?

“Could the Swiss National Bank (SNB) be at work here? Recall that the dollar is the second-largest weight in the Swiss franc trade-weighted basket and a higher USD/CHF will naturally weaken the nominal trade-weighted Swiss franc – something the SNB wants to avoid as it battles inflation. In fact, SNB president Thomas Jordan is turning into one of the most ardent hawks in the central bank community.”

“We have quite a forthright view on EUR/CHF at the moment that the SNB wants to guide it lower by 5% plus per year. The higher USD/CHF is making the trade-weighted Swiss franc even softer and if we are right, the SNB should be even more inclined to drive EUR/CHF down to 0.95 and away from the near 0.98 levels at which spot EUR/CHF trades today.”