According to Jinshi, the cost of hedging the Swiss franc overnight soared in early trading on Wednesday, marking the largest increase since the Swiss National Bank unexpectedly lifted the cap on the Swiss franc against the euro in 2015. The Swiss National Bank will announce its interest rate decision on Thursday, and the market is still uncertain whether the central bank will choose to cut interest rates or send a signal of support for the Swiss franc through foreign exchange intervention.
That makes the cost of hedging against Swiss franc volatility the highest since 2022. Overnight volatility on the euro against the Swiss franc surged to 18.27%, the highest since March 2023, before falling back to around 15%.
Market concerns now revolve around policy risks, with Goldman Sachs strategists pointing out that the Swiss National Bank may sell foreign currency to signal support for the Swiss franc. Traders are divided on whether the central bank will take interest rate action.
