The Japanese yen is stretching its advantage over the Swiss franc, and DBS says the currency cross between the two still has room to weaken further. The bank's foreign-exchange desk noted that CHF/JPY has failed to climb back into the 198-204 band it traded in from February through July, and has instead dropped to 193, its lowest print since December. From here, DBS sees the door open for a slide toward 186, a level that sits close to the pair's 100-week moving average.
A Widening Gap Between Two Central Banks
DBS's first reason for the bearish call is straightforward, monetary policy in Japan and Switzerland is now moving in opposite directions, and that split increasingly favours the yen over the franc. Traders are pricing in near-100% odds that the Bank of Japan will raise its policy rate by 25 basis points, to 1.25%, when it meets on September 18. The BOJ has already signalled that as long as underlying inflation tracks its own forecasts, financial conditions in Japan remain loose enough to keep normalising policy at pace, which is central-bank language for more hikes to come.
Switzerland is heading in the opposite direction. The Swiss National Bank meets six days later, on September 24, and DBS says it has zero incentive to lift its policy rate from its current 0% setting. Both headline and core consumer price inflation in Switzerland are sitting near the bottom of the SNB's own 0-2% price stability band. Where several other central banks have reacted to energy-driven inflation spikes, the SNB is choosing to look through that effect rather than tighten policy in response. Keeping the policy rate at zero also serves a second purpose for the SNB, it caps the franc's appeal as a yield-bearing currency, which in turn supports domestic credit growth and employment at home.
A Second, Harder-to-Read Risk: Intervention
DBS's second reason for flagging downside risk in CHF/JPY is that the pair carries what it calls asymmetric FX intervention risk, meaning the odds that a central bank steps in to manage the exchange rate are not evenly balanced between Japan and Switzerland. Japanese authorities have a well-documented history of intervening to support the yen when it weakens too sharply, while the SNB has historically been more inclined to act against unwanted strength in the franc. That asymmetry cuts against traders piling too aggressively into a weaker-CHF, stronger-JPY trade, even while the broader policy backdrop supports that direction.
Chart Levels: Watching for 186
On the charts, the break below the 198-204 range that held from February to July is the technical trigger DBS is watching. Since that range gave way, CHF/JPY has fallen to 193, and the bank's next downside marker is 186, close to the pair's 100-week moving average, a level that has acted as a magnet for the cross in past corrections.
Yen Strength Is Showing Up Beyond the Franc Too
The same policy dynamics DBS points to in the CHF/JPY story are visible elsewhere in the yen's trading. USD/JPY was last changing hands around 154.42, down 0.79% from its previous close of 155.66, having traded in a 52-week range of 146.22 to 163.98. The pair's 14-day Relative Strength Index has dropped to 25, in oversold territory, while its MACD line at -0.84 sits below its signal line of -0.51, a bearish reading with a histogram of -0.33. USD/JPY is also trading below all three of its key moving averages, the 20-day EMA at 158.72, the 50-day EMA at 159.62 and the 200-day EMA at 157.82, and has slipped beneath the lower band of its Bollinger channel at 156.16. Its Average Directional Index reading of 43 points to a strongly trending market, and the pair's Stochastic fast line at 6 versus a signal line of 28 underscores how stretched the recent move lower has been. On the day's pivot map, USD/JPY's pivot point sits at 154.92, with resistance at 155.79 and 157.15, and support at 153.55 and 152.68, while its 14-day Average True Range of 1.52 gives a sense of the daily swings traders are working with. None of that is the CHF/JPY story DBS is describing, but it shows the same forces, an increasingly hawkish Bank of Japan and traders repricing yen exposure ahead of September 18, are pulling on more than one currency pair at once.
With the BOJ meeting on September 18 and the SNB following on September 24, the next fortnight is likely to be the real test of DBS's call. If the Bank of Japan delivers the hike markets are already pricing in while the SNB stands pat at zero, the policy gap DBS describes would widen further, adding weight to the case for CHF/JPY extending its slide toward 186.
