The New Zealand dollar (NZD) has recently benefitted from a risk-on sentiment in the currency markets, which has boosted its demand as a high-yield currency. The NZD rose to 7-day highs near 0.4641 against the Swiss franc (CHF), yet remains 2.0% below its three-month average of 0.4736. It has traded within a stable range of 0.4607 to 0.4825 recently, reflecting a cautious but optimistic outlook.
Analysts have noted that the Reserve Bank of New Zealand’s (RBNZ) recent decision to cut the official cash rate to 3.00% is a significant factor affecting the NZD. This move aims to support a fragile economic recovery amid global uncertainties but may dampen the currency's appeal compared to higher-yield alternatives. The influence of U.S. tariffs, which have been suggested to ease medium-term inflation by lowering import prices, raises concerns regarding business investment and consumer spending in New Zealand, creating a nuanced environment for the NZD.
Conversely, developments in Switzerland, particularly interventions by the Swiss National Bank (SNB), have implications for the CHF. The SNB’s substantial increase in foreign currency purchases—at the highest level in over three years—has been a response to currency appreciation fears following U.S. tariffs on Swiss exports, which are significantly impacting its export-led economy. Moreover, the SNB’s recent interest rate cut to 0.25% highlights the low inflationary pressures that continue to challenge the Swiss economy.
The deterioration in Switzerland's economic outlook, as noted by the IMF, reaffirms a cautious approach toward the CHF. Overall, market analysts believe that while the NZD may maintain a degree of upward momentum should investor sentiment remain positive, the Swiss franc faces headwinds from both domestic monetary policies and external economic pressures. As such, fluctuations in the NZD/CHF exchange rate are likely to reflect the evolving dynamics of risk sentiment and global economic developments.
