UBS warns the Swiss franc could weaken further against the euro as low yields and diverging central bank policies push EURCHF higher. If the Swiss National Bank keeps rates steady, a move toward 0.96 is possible.
UBS is cautioning that the Swiss franc's low yield is making it vulnerable as the euro strengthens. The EURCHF exchange rate has moved above 0.94, and UBS sees a real chance it could approach 0.96 if the Swiss National Bank (SNB) leaves rates unchanged at its next meeting. The gap between Swiss and European yields has widened, mainly because the European Central Bank (ECB), Federal Reserve (Fed), and Bank of England (BoE) are expected to keep policy tight, while the SNB is not expected to raise rates.
This divergence matters for anyone exposed to the Swiss franc. The so-called carry disadvantage-where holding francs pays less than holding euros or other major currencies-has become more costly as global energy prices rise and other central banks tighten policy. UBS points to this as a main reason for the franc's recent weakness. If the SNB stays on hold, the bank expects EURCHF could retest 0.96 in the near term.
Yield gap and policy divergence
UBS notes that while markets have priced in future rate hikes, the SNB is likely to keep policy steady for now. As of 15 September 2026, the SNB's policy rate is 0.00%, unchanged since June 2025. The sight deposit rate below the threshold remains at -0.25%. In August 2026, the threshold factor was raised to 13.5, part of the SNB's ongoing liquidity management. This leaves the franc at a disadvantage compared to currencies backed by central banks still tightening, like the ECB and Fed, whose rates remain well above Swiss levels. As a result, the euro has gained against the franc, with the exchange rate moving above 0.94. If the policy gap continues, there is further upside risk for EURCHF, as shown in the official SNB interest rate and exchange rate data.
On 15 September 2026, SNB data showed the EURCHF exchange rate at 0.9430, confirming the move above 0.94. The yield on 10-year Swiss Confederation bonds was just 0.653%, highlighting the persistent yield gap with eurozone bonds. In a speech on 11 September 2026, SNB President Martin Schlegel said the franc's exchange rate "remains a challenge for the Swiss economy," even though the real effective franc has been broadly stable since 2020. The SNB holds policy meetings in March, June, September, and December. Ahead of the September 2026 meeting, most market participants expect no change in rates, based on independent FX coverage and SNB guidance.
Short-term risks and medium-term outlook
UBS does not expect the SNB to change policy at its September meeting. Analysts at the bank believe the carry disadvantage will keep weighing on the franc's total returns in the short term. Most market participants expect the SNB to hold steady, especially as the ECB and Fed keep rates high. Still, UBS notes that this situation may not last. Over the medium term, the bank expects EURCHF to move lower again if the SNB eventually tightens policy and the yield gap narrows. For more on SNB policy and economic indicators, see the official SNB president's September 2026 speech.
This is not the first time the Swiss franc has come under pressure due to global rate moves. As reported earlier, the franc has weakened before when other central banks signaled higher rates, showing how much relative yield matters in currency markets.
What is the carry disadvantage?
The carry disadvantage means investors earn less interest holding a currency with a lower yield. For the Swiss franc, low policy rates mean investors get less for holding francs than for holding euros, dollars, or pounds. When global rates rise elsewhere and the SNB stands still, the gap widens, making the franc less attractive and encouraging capital to move into higher-yielding currencies. This puts downward pressure on the franc's exchange rate, especially when safe-haven demand is muted. Central bank policy, bond yields, and FX market expectations all continue to shape the outlook for the Swiss franc and the EURCHF pair.
