The global flight to safety that has defined the opening weeks of 2026 is reshaping currency markets, lifting traditional havens while unsettling the economies that issue them.
Gold and silver have climbed to fresh records as investors hedge against geopolitical risk and policy uncertainty, but few assets capture the moment more starkly than the Swiss franc, now trading at levels last seen more than a decade ago against the U.S. dollar, per CNBC.
The franc’s surge is a familiar refuge trade for investors, while it remains a growing economic and political dilemma for policymakers.
The currency has already risen about 3.5% against the dollar this year, building on a powerful 12.7% appreciation in 2025. On Tuesday, it touched an 11-year high versus the greenback and remained close to those levels the following day, even after modest profit-taking.
The move reflects a convergence of global anxieties: unpredictable U.S. trade policy under President Donald Trump, renewed debate about the Federal Reserve’s independence, and escalating geopolitical flashpoints stretching from Greenland to Latin America and the Middle East.
Each new shock has reinforced the franc’s reputation as a store of value in turbulent times. Yet that same reputation is now complicating Switzerland’s economic management.
“Further escalation, geopolitically, means more uncertainty,” Swiss National Bank Chairman Martin Schlegel said last week on the sidelines of the World Economic Forum in Davos. “It’s not good for the Swiss franc or for Switzerland, because the Swiss franc is a safe haven. Whenever there is uncertainty in the world, the Swiss franc appreciates, and this makes monetary policy more complicated for Swiss National Bank.”
At the heart of the problem is inflation, or rather the lack of it. Switzerland is grappling with price growth of just 0.1%, far below levels seen in the United States or the euro zone. The SNB’s key policy rate is already at 0%, leaving little conventional room to counter further disinflation. A stronger franc, by making imports cheaper, risks dragging inflation even lower and pushing the economy closer to negative territory.
The challenge is magnified by the structure of Switzerland’s export-driven economy. Giuliano Bianchi, co-founder of the Quantitas Institute at EHL Hospitality Business School, points out that many of Switzerland’s flagship industries operate in markets where price sensitivity is limited. Pharmaceuticals, precision engineering, luxury manufacturing, and high-value services tend to compete on quality, reliability and intellectual capital rather than price alone.
That means foreign demand does not fall sharply when the franc rises, blunting the natural corrective mechanism that might otherwise weaken the currency. Instead, exporters absorb the shock through thinner margins, slower wage growth and restrained investment. Over time, that dynamic can weigh on domestic demand without delivering the currency adjustment policymakers might hope for.
The SNB has faced this bind before. For seven years after the global financial crisis, it relied on deeply unpopular negative interest rates to deter capital inflows and cap the franc’s strength. That policy ended in 2022, when rising global inflation allowed the central bank to normalize rates. Returning to negative territory would be politically sensitive and economically costly, particularly for savers, pension funds and banks whose profitability suffers when rates fall below zero.
Schlegel has not ruled it out anyway. “The bar to go negative is higher than normal, but if we need to go negative, we will go negative,” he said, underscoring the SNB’s willingness to act if price stability is threatened. Still, few policymakers appear eager to revisit a tool that proved controversial and blunt.
Foreign exchange intervention is another option, and one the SNB has used extensively in the past. By selling francs and buying foreign currencies, the central bank can directly weaken its currency. Today, however, that approach carries new risks, particularly on the diplomatic front.
Switzerland only recently emerged from the sharp end of President Trump’s tariff regime. Last year, the U.S. imposed tariffs of up to 39% on Swiss goods under its so-called reciprocal tariff framework, citing trade imbalances and alleged currency practices. A subsequent deal reduced those tariffs to 15%, but the episode left Swiss officials acutely aware of Washington’s sensitivity to exchange rate issues.
In June, the U.S. Treasury added Switzerland to a “Monitoring List” of trading partners whose currency practices and macroeconomic policies warrant close attention. Any overt attempt by the SNB to weaken the franc could be portrayed in Washington as manipulation, regardless of Switzerland’s domestic justification.
Trump’s own rhetoric has only heightened that concern. In a speech in Davos last week, he said tariffs on Switzerland were raised in part because then-Swiss president Karin Keller-Sutter “just rubbed me the wrong way,” a remark that reinforced perceptions of an unpredictable and highly personalized approach to trade policy. For Bern, avoiding renewed friction with the White House has become an important constraint on monetary strategy.
Market participants, meanwhile, remain largely unfazed by the SNB’s predicament. Lloyd Harris, head of fixed income at Premier Miton Investors, argues that the franc’s strength is structural rather than cyclical. Switzerland’s persistent current account surplus, political stability, and close association with rising gold prices all support long-term demand for the currency, he says.
“From a long-term perspective, the Swiss franc is the strongest currency on earth,” Harris noted, adding that even if the SNB intervenes to smooth excessive moves, the franc is likely to continue outperforming the dollar over the medium term.
Academic economists share that view, pointing to recent episodes where safe-haven inflows overwhelmed policy easing. Claudio Sfreddo, a doctor of economics and adjunct professor at EHL Hospitality Business School, says political sensitivity around FX intervention further narrows the SNB’s room for maneuver. The central bank is effectively forced into a trade-off between defending price stability and supporting growth, with limited tools and heightened external scrutiny.
For now, Schlegel insists the SNB will not be paralyzed by those constraints. “We are ready to intervene in the FX market if necessary,” he said in Davos, signaling that the central bank’s mandate will take precedence if conditions deteriorate.
The broader picture, however, is one of an economy caught in the crosscurrents of global instability. As long as geopolitical tensions remain elevated and confidence in U.S. policy direction stays fragile, capital is likely to keep flowing into Swiss assets. That reinforces the franc’s status as a haven of last resort, even as it tightens the screws on Switzerland’s exporters and policymakers.
In that sense, the franc’s surge is both a vote of confidence in Switzerland and a reminder of the costs that come with being the world’s financial shelter.
