The Swiss franc’s 11-year high has caused trouble in Switzerland

Safe-haven assets are off to a good start in 2026, with widespread uncertainty sending gold and silver to new records and the Swiss franc trading at a decade-high.

But in Switzerland, politicians are watching with horror.

The Swiss franc Against the U.S. dollar, it is up 3.5% this year, boosted by unpredictable U.S. trade policy, questions about the Federal Reserve’s independence and threats of U.S. military intervention in Greenland, Latin America and the Middle East.

This comes after a 12.7% strengthening against the dollar in 2025. It hit an 11-year high against the dollar on Tuesday and was close to those levels on Wednesday morning, even as it pared gains.

Swiss National Bank Governor Martin Schlegel told CNBC’s Karen Tsogo: “Further escalation means more geopolitical uncertainty.” World Economic Forum in DavosSwitzerland, last week.

“This is not good for the Swiss franc and for Switzerland, because the Swiss franc is a safe haven. As there is uncertainty in the world, the Swiss franc appreciates, which makes monetary policy difficult for the Swiss National Bank.”

Unlike regional powers, Switzerland is struggling with sluggish price growth, and a stronger franc could further add to inflationary pressures on the country’s export-led economy.

“The Swiss franc remains strong in part because demand for many Swiss exports is relatively price inelastic,” Giuliano Bianchi, founder of the Quantitas Institute, EHL’s hospitality business school, told CNBC.

He noted that in key industries such as pharmaceuticals, precision manufacturing, and high-value services, currency appreciation does not reduce external demand, but weakens the exchange rate stabilization mechanism.

“This complicates the SNB’s task as a strong franc lowers import inflation and squeezes exporters’ margins, weighing on wages and investment at a time when inflation is already slowing,” he said.

With the country’s inflation rate of just 0.1% and the Swiss National Bank’s key policy rate at 0%, Switzerland is on the border between inflation and negative interest rates.

In 2022, the SNB ended seven years of negative interest rates, which are unattractive to savers and lenders because they wipe out returns on savings deposits and squeezing banks’ margins and profitability.

“The downside bar is higher than normal, (but) if we have to go negative, we’re going negative,” Schlegel told CNBC.

Another tool the SNB has used in the past to cool the Swiss franc is to intervene in the foreign exchange market by selling francs and buying foreign currencies.

However, doing so now comes with risks, months after Switzerland reached a trade deal to cut tariffs from 39% — the worst under the Trump administration’s tariff regime — to 15%.

The Trump administration introduced the heavy tariff last year as part of its are called reciprocal tariffsThe White House said this was partly a response to “currency manipulation and trade barriers” by other countries.

In June, the White House announced that SwitzerlandChecklistOf the nine trading partners whose “currency practices and macroeconomic policies require attention.”

Last week, Trump described how passionate he was about then-Swiss President Karin Keller-Sutter “rubbing me the wrong way” in his speech in Davos last week when he said tariffs against Switzerland had risen from 31% to 39%. The country is still wary of incurring the wrath of the White House.

Lloyd Harris, head of fixed income at Premier Miton Investors, argued that the franc’s appeal as a stable asset could support its growth trajectory regardless of SNB policy decisions.

“Over the long term, the Swiss franc is the strongest currency on earth, and it is likely to remain relatively stable this year,” he told CNBC in an email.

“Factors supporting it are gold prices, Switzerland’s safe-haven status in the face of geopolitical turmoil and its persistent current account surplus. The SNB may intervene in the event of excessive strength, but in the medium term we don’t really see the Swiss franc moving higher against the US dollar.”

Claudio Sfreddo, a PhD in economics and adjunct professor at Switzerland’s EHL Hospitality Business School, said recent safe-haven flows could strengthen the franc even if the SNB takes steps like cutting interest rates, otherwise easing the currency’s rise.

“At the same time, greater political sensitivity to currency interventions will further limit the SNB’s room for maneuver and exacerbate the trade-off between price stability and growth,” he told CNBC.

Nevertheless, Schlegel insisted in Davos that the SNB will do what it needs to do to fulfill its mandate – even if it could provoke fresh anger from Washington.

“If necessary, we are ready to intervene in the currency market,” he said.