SNB decision: franc down, euro up

Context

In brief

• Swiss franc falls after BNS rate decision
• Euro climbs above 0,94 francs, dollar at annual highs
• BNS keeps policy rate at 0%
• Depreciation in line with foreign rate differentials

Key facts

Policy rate: 0% Euro exchange rate: 0,9423 francs Dollar exchange rate: 0,8268 francs Franc depreciation: about 3% since June

The Swiss National Bank (SNB) announced this morning its interest‑rate decision, triggering an immediate reaction in the foreign‑exchange markets. The franc lost ground sharply, while the euro rose above the 0,94‑franc threshold and the dollar reached its highest level in about a year against the Swiss currency.

Currently, the dollar is trading at 0,8268 francs, while the euro stands at 0,9423 francs. The SNB decision, which markets had anticipated, was to keep the policy rate at zero percent. However, market participants' focus quickly shifted from the rate figures to the central bank's communications regarding franc management.

SNB monitoring

According to a market observer, the SNB is now monitoring exchange‑rate fluctuations in both directions more closely. This approach is crucial because a stronger franc could help counter inflationary pressures coming from abroad, especially given the recent rise in energy prices.

SNB President Martin Schlegel clarified in the Thursday rate‑decision speech that the national currency has depreciated by about 3 percent on a trade‑weighted basis since June. This depreciation is seen as consistent with the widening of interest‑rate differentials between Switzerland and the major currency areas. Although long‑term rates in Switzerland have risen slightly, they have done so to a lesser extent than abroad, making the franc relatively less attractive to global investors.

Operational details

Implications for the purchasing power of the frontier

The weakening of the franc has a direct and immediate impact on the lives of those who work in Switzerland and reside in Italy. For a frontier worker, a more favourable exchange rate of the euro compared to the franc (i.e. a stronger euro) means that, with the same salary in francs, the amount converted into euros will be lower. This phenomenon concretely reduces the purchasing power for those who move their earnings across borders to cover expenses in euros.

Considering that the euro has risen above 0.94 francs, those who receive their salary in CHF and convert it daily or monthly into EUR will suffer a contraction in the real value of their income. This scenario is the opposite of what happened during periods of strong appreciation of the franc, where each franc earned was worth more euros.

The effect on inflation and import costs

The SNB highlighted how the devaluation of the franc is reflected in inflation. Compared to June, the institution revised its medium-term inflation forecasts upwards. This is because a weaker franc makes goods and services imported into Switzerland more expensive. For the frontier worker who makes purchases in Swiss territory, this could result in an increase in consumer prices.

According to the SNB's forecasts, inflation is expected to rise again slightly in the fourth quarter of 2026, before falling again in 2027.

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Key points

How to manage exchange rate risk

For cross-border workers, the exchange rate movement is one of the most volatile variables of the payroll. When the franc loses ground, as happened after the latest SNB decision, it is essential to constantly monitor the currency value to decide when to convert savings or pay current expenses. In a depreciation phase, it might be less convenient to immediately convert the entire salary into euros.

Operational strategies for the cross-border worker

For those who want to optimise financial management, the following steps can be followed:

1. Rate monitoring: Keep an eye on SNB communications and the movement of pairs like CHF/EUR to avoid conversions at peak negative moments. 2. Account diversification: Keep part of savings in Swiss francs to cover expenses incurred in Switzerland (such as health insurance or social security contributions) and convert into euros only what is strictly necessary for expenses in Italy. 3. Medium‑term planning: Consider that, according to the SNB, inflation could rise again in 2026, influencing the cost of imported goods.

SNB intervention and outlook

Martin Schlegel reiterated that the national bank remains ready to intervene in the foreign‑exchange market if necessary. This means that the franc's value is not left exclusively to the free market, but can be corrected by the SNB to support the Swiss economy, facilitating export‑oriented companies.

For those working in Ticino, the balance between a strong franc (which protects against imported inflation) and a weak franc (which favours export) creates uncertainty. To understand exactly how these currency fluctuations affect one's net monthly salary, you can use our simulation tool. salary calculator

Source: tio.ch