Morgan Stanley Identifies Swiss Franc as Top Gold-Like Haven Currency with Potential 17% Surge Against Dollar

Morgan Stanley strategists have indicated that the Swiss franc could appreciate by as much as 17% against the U.S. dollar, as confidence grows in its status as a safe-haven currency amid uncertainty surrounding U.S. policy.

Strategists led by David Adams noted in a report that Switzerland's low inflation, fiscal stability, and secure assets make the Swiss franc "arguably the most 'gold-like' safe-haven currency."

They stated that under a "pessimistic scenario," the U.S. dollar could fall to a historic low of 0.64 against the Swiss franc. The exchange rate was trading near 0.776 on Monday.

Adams remarked, "The Swiss franc is an overlooked and undervalued safe-haven asset, and it appears poised to appreciate more significantly and rapidly than investors anticipate or what the market has priced in." He added that the Swiss franc has the strongest track record of outperformance during market shocks, making it the "most tested" safe-haven asset.

This outlook comes as hedge funds are also betting on Swiss franc strength. According to the latest weekly data from the U.S. Commodity Futures Trading Commission, leveraged funds now hold the largest net long position in the Swiss franc since June, whereas they held a net short position just a week earlier.

Last month, the Swiss franc strengthened to its highest level in over a decade against both the euro and the U.S. dollar. Investors are attracted by Switzerland’s moderate debt levels, stable economy, and predictable policies, viewing it as a contrast to policy turbulence in the U.S. amid rising geopolitical risks.

Although a stronger Swiss franc raises the possibility that the Swiss National Bank might intervene to curb domestic deflationary pressures, a growing number of economists acknowledge that monetary authorities currently appear reluctant to act against the currency's strength.

Morgan Stanley expects the Swiss franc to continue strengthening against other currencies and forecasts a 5% rise against the euro, moving from approximately 0.91 francs per euro to 0.87 francs per euro.