Sep 30 2026 12:15 AM EST
CHF/KRW Weakens as Safe‑Haven Demand Outpaces Korean Rate Hikes
The CHF/KRW exchange rate dropped 13.8% over the past three months, reflecting a strengthening of the Swiss franc against the South Korean won. The primary driver was the Swiss franc’s safe‑haven appeal amid the Swiss National Bank’s decision to keep its policy rate at 0 % and limited foreign‑exchange intervention.
The SNB’s September 2026 assessment confirmed the policy rate unchanged at 0 % and raised its inflation outlook to 0.6 % for 2026 and 2027, and 0.7 % for 2028. At the same time, the Bank of Korea (BoK) delivered two consecutive hikes, lifting its base rate to 3.00 % by August 2026. Korean core inflation accelerated to 3.4 %, while headline CPI peaked at 3.2 % in June. Despite robust export momentum—semiconductor shipments rose 151.4 % month‑on‑month to $32.83 billion in March 2026 and the current‑account surplus reached a record $49.73 billion in June—the Korean won struggled to retain value against the franc.
Safe‑Haven Flow to the Franc
Geopolitical tension stemming from the 2026 Iran‑War heightened demand for assets perceived as safe, with the Swiss franc benefitting from its political neutrality and strong sovereign credit profile. After the SNB announcement, the USD/CHF rose to about 0.827—the highest level since late May 2026—signalling continued franc weakness against the dollar, but the CHF’s relative strength versus the won was reinforced by risk‑off flows.
Interest‑Rate Differential and Capital Flows
The widening gap between the SNB’s zero‑rate policy and the BoK’s 3 % rate created a nominal advantage for the won, yet the elevated Korean inflation and the perception of heightened domestic risk reduced the attractiveness of KRW‑denominated assets. Investors therefore favoured the franc’s low‑yield, low‑risk profile, a dynamic that outweighed the carry‑trade incentive of borrowing CHF to buy won.
Positioning and Market Sentiment
Market participants have priced the SNB’s willingness to intervene in FX markets “as necessary to ensure appropriate monetary conditions,” but intervention data are published with a three‑month lag, limiting immediate impact. The Korean won, despite a record current‑account surplus of $49.73 billion in June 2026, faced pressure from a tightening monetary stance and rising inflation expectations, leading to net outflows from KRW‑denominated positions.
Risks and Near‑Term Catalysts
The next SNB policy meeting on 10 December 2026 could alter the franc’s trajectory if the board decides to adjust the policy rate or intensify FX intervention. On the Korean side, upcoming releases of core CPI and the BoK’s minutes in September will clarify whether further rate hikes are imminent. A resurgence of risk appetite, or a de‑escalation of Middle‑East tensions, could reverse the safe‑haven flow and support the won, while any surprise tightening from the SNB would likely reinforce the franc’s strength.