A look at the best/worst major currencies this week is worrisome
Swiss franc strength isn't what you expect to see in a run-away week for stocks
It's rare to see the Swiss franc and Japanese yen at opposite ends of the FX leaderboard. They generally move in the same direction because they're both low yielders and safe-haven currencies.
So what happened? One argument is that this was a Swiss idiosyncratic move:
- The US added Switzerland to the FX watchlist for manipulation. That diminishes the chances of large-scale intervention
- Technical breaks in EUR/CHF and USD/CHF added to momentum
- Russian political drama added to the bid for CHF
I wouldn't disagree with any of those factors but it's still a stark difference. The other argument is that this run-up in risk is driven by leverage from cheap money, retail chasing momentum and year-end effects.
Ultimately, the market will have to answer but I just can't get behind this run in risk until we see a bit more alignment in equities with FX and bonds.