The European Central Bank is struggling to revive the region's economy, Britain and Greece are moving closer to leaving the European Union -- and Switzerland is feeling the pain.
The franc has been climbing, again. Since hitting a low of 1.12 against the euro on Feb. 3, the currency has gained almost 3 percent, and is now trading just below 1.09.
Buying by hedge funds and asset managers of the franc picked up in late March, according to Bank of America, spurred primarily by concern that Britain will vote to exit the EU in June.
Add the risk Greece will be pushed into default after breaking the conditions of its bailout, and demand for a safe haven looks set to intensify.
One-month 25 delta risk reversals are a good measure of how much investors favor one currency over another. The gauge shows the difference between the cost of buying options to sell the franc with those to buy. On that measure, investors are the most bullish about the franc in 14 months.
As the franc's rise has gained pace, so volatility has rebounded. One-month Swiss franc volatility has risen to almost 9 percent from a low of 8 percent on March 18.
The franc's strength won't be welcomed by the Swiss National Bank. Since it jettisoned the cap that held the franc in check against the euro at 1.20 in Jan. 2015 and slashing the rate on bank deposits with the central bank to minus 0.75 percent, the SNB has intervened to sell the currency to try and keep its strength from further harming the economy.
Growth has cooled as the rising currency hit exports to the euro area. Producers pinning their hopes to other regions were met with headwinds from emerging markets and China, where sales of pricey watches had their first annual drop since 2009. Swatch CEO Nick Hayek said last month he had one worry: the strong franc.
Investors have been increasing their bets the SNB will have to take its benchmark rate further into negative territory since March 19, when the ECB signalled it could cut rates further. The three-month December Swiss Libor future is fixing at minus 0.89 percent, implying a 14 basis-point reduction from the central bank's current target level.
A rising currency means those odds could go even higher.
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