Swiss franc demand is set to Increase, UBS predicts

Bloomberg reports that strategists at UBS Group AG predict that investor demand for Switzerland's currency, already trading at a five-year high, will increase as the country's economy will outperform others during the recession.

"Switzerland enters this recession with excellent credit quality, and its pandemic health situation is under control," UBS strategists Thomas Flury and Gaetan Peroux wrote in a note to clients. "Hence its economy should do relatively well in comparison to other regions."The economic impact of a further decline of the euro against the franc should be limited, as Swiss tourism and many export sectors are already suffering from a drop in activity.

Only at a level of 1.03 francs per euro would the economy face more serious consequences, UBS said. The currency pair currently trades at around 1.052 francs.

The Swiss National Bank said last month it sold francs more aggressively in the foreign exchange market to push back against the appreciation.

Given the likelihood of a further weakening of the euro, investors should hedge their exposure to the common currency, UBS suggested.