Upside risks are anticipated for the Japanese Yen (JPY) in the coming year, while downside risks are expected for the Swiss Franc (CHF), according to analysts at HSBC.
The outlook suggests a potential recovery for the JPY in 2024, particularly as the US-Japan yield differential is projected to narrow, which could support the currency amid other contributing factors.
Meanwhile, the Swiss National Bank (SNB) surprised markets with a dovish move on March 21 by implementing a 25 basis points rate cut. This unexpected decision has led to further weakness in the CHF since the beginning of the year. As the first G10 central bank to enact such a cut, the SNB’s action is likely to weigh on the CHF, potentially prompting investors to engage in carry trades away from the currency amidst a period of low foreign exchange (FX) volatility.