The currency expert at the Swiss private bank Union Bancaire Privée expects the dollar to weaken further, takes a dim view of negative interest rates, and is taking advantage of low market volatility.
Peter Kinsella on the rising price of gold:
“Gold is behaving exactly as one would expect in this situation.”
In brief:
- The dollar is on a long-term downward trend against major currencies.
- Despite the strong franc, the Swiss National Bank is unlikely to introduce aggressive negative interest rates.
- Negative interest rates have little impact on the franc's exchange rate.
- The euro and the Australian dollar offer the best exchange-rate potential.
In recent weeks, the dollar has appreciated slightly against its main competitors, despite the government shutdown and unchecked debt levels in the US. In Europe, the financial solidity of France – the second most important economy in the euro – is crumbling. Nevertheless, the single currency remains stable, even against the Swiss franc, which is appreciating strongly against other currencies. Peter Kinsella, long-standing chief currency strategist at the Geneva-based private bank UBP, explains the trends on the global currency markets and highlights the opportunities to be had.
Peter Kinsella, how dangerous is the US government shutdown for the dollar?
For the market, it’s a non-event. It’s simply another game of ‘chicken’: two political parties challenging each other to see who blinks first. Usually, this kind of standoff only lasts a few weeks.
What’s your view on the outlook for the dollar?
Over the next month or two, the exchange rate will likely move sideways, as external data remain mixed. But in the longer term, the depreciation trend is still in its early stages: if we compare it to baseball, we’re only in the third inning out of nine; there’s a lot more depreciation to come.
Why is the dollar continuing to weaken?
Looking at inflation differentials between the United States and China over the past five years, cumulative inflation in the US is probably around 25%, while in China it’s essentially zero. This alone implies that the US needs a significant dollar depreciation. I suspect that, behind the scenes, the US government is leaning heavily on other countries to let their currencies appreciate against the dollar.
“Behind the scenes, the US government is leaning heavily on other countries to let their currencies appreciate against the dollar.”
Are you seeing any evidence of that?
The US Treasury recently signed joint declarations with Japan and then with Switzerland, in which both countries explicitly commit not to intervening in the foreign exchange market to gain a competitive advantage. The Swiss National Bank (SNB) has never done that anyway – it only intervened to counter deflation risks and that’s an important distinction. But this US diplomatic approach shows we’ve entered a new phase in a broader dollar depreciation trend.
How will the dollar perform against the Swiss franc?
In the next year, one dollar will only cost CHF 0.77, with downside risks towards CHF 0.75 or even CHF 0.73.
Do you expect the SNB to introduce negative interest rates?
The SNB expects inflation to remain stable over the next few years, which reduces the likelihood of aggressive negative rates. The European Central Bank (ECB) also doesn’t appear willing to cut rates sharply again, further reducing any sense of urgency at the SNB. And since the SNB cannot intervene in the forex markets while trade discussions with the US are ongoing, the franc is likely to remain strong.
The franc is stable against the euro but is appreciating sharply against the dollar. How important is the dollar for the SNB’s monetary policy decisions?
Not very. Of course, the SNB monitors the dollar, but the EUR/CHF exchange rate matters far more. Overall, the SNB is probably quite content with the current rate around CHF 0.93. If it nears CHF 0.90, it may step up its verbal interventions. But with Swiss GDP growth at about 1.5% this year and 1.0% expected next year, and with slightly positive inflation, I don’t think the SNB needs to act on the exchange rate – unless the trade dispute with the US escalates, in which case the franc could appreciate further.
Could the SNB still use negative rates to weaken the franc?
Two-year forward rates on SARON swaps imply about 10 basis points of negative rates. I don’t expect that to happen, but if it does, the SNB would probably cut only marginally – perhaps to around -0.1%.
“Over the past ten years, despite negative SNB rates, banks effectively faced no negative deposit rates.”
Are negative rates an effective tool against franc appreciation?
No, not at all. Over the past ten years, despite negative SNB rates, banks effectively faced no negative deposit rates. The banking system absorbed the profitability losses itself: these costs were not passed on to retail or corporate clients. This basically means the interest rate steps taken by the SNB had no real deterrent effect on the exchange rate.
But the SNB justifies negative rates by saying they prevent franc appreciation by curbing capital inflows and encouraging outflows.
That simply didn’t happen. Switzerland’s current account remained strong throughout the negative rate period, and foreign direct investment was stable. The negative interest rates had only a marginal effect; banking deposit data suggest investors weren’t deterred. The biggest obstacle for foreign investors looking to invest in francs lies elsewhere.
Where exactly?
There’s a shortage of investable franc-denominated assets. The bond market is small, and so is the local stock exchange. The range of available investment options is limited and that’s a key factor restricting large-scale foreign inflows into the franc.
But during the euro crisis, we saw massive capital inflows, mainly into fiduciary accounts.
During the euro crisis, investors simply wanted out of the euro and into francs as a safe haven. But once the acute phase of perceived risk passed, they started looking for investment opportunities, and those are limited in Switzerland: the equity market is small. Besides that, you can buy real estate, but not much else.
“Investment opportunities in Switzerland are limited.”
How is the gold price affecting the dollar?
I’d rather say the dollar affects the gold price. Gold recently traded just below USD 4,000 per ounce – up about 50% since the start of the year, and roughly 140% since 2020. There are several reasons for this: irresponsible fiscal and debt policies in the US, the UK, and the eurozone; excessive debt levels; geopolitical factors; and concerns about central bank independence. Gold is behaving exactly as one would expect under such conditions. That’s why I’ve raised my gold forecast to USD 4,600 by the end of 2026.
Which currency offers the best return potential over the next 6–12 months?
The euro looks good. The Australian dollar also has room to rise, benefiting from stronger economic growth in Australia, and any recovery in commodities typically supports the AUD.
And where do you see downside risks apart from the dollar?
The British pound faces increasing risks. The key issue is the fiscal budget, which must be passed in November. If the government fails to rein in public spending, sterling could weaken, albeit more against the euro and franc than against the dollar.
“Volatility and risk are not the same thing.”
Why has market volatility fallen?
Volatility is extremely low for several reasons: fears of steep tariff hikes and high US inflation have faded; China’s economic growth and housing market have stabilised; and Beijing has adopted a somewhat more market-friendly policy stance. But volatility and risk are not the same thing.
In what sense?
Volatility measures price movements whereas risk is a set of potential outcomes which markets try to account for, along with an element of uncertainty. When we look at what has most affected portfolios in recent years, it’s uncertainty, not risk: the Covid-19 pandemic, the 2022 inflation surge, and so on.
How can investors take advantage of low volatility?
Low volatility makes hedging inexpensive. It’s therefore a good time to buy protection for portfolios – especially equities. You stay invested but are shielded against sharp downturns.
How should companies hedge their foreign currency liabilities?
In my opinion, companies with revenues in francs or euros and costs in dollars don’t need to hedge, as they benefit from the dollar’s weakness. The opposite is true if revenues are not in dollars but costs are, then hedging strategies are necessary. Large corporations tend to be quite good at hedging; SMEs still have room for improvement.
The opinions expressed herein are correct as at 09 October 2025 and are subject to change without notice. Any forecast, projection or target, where provided, is indicative only and is not guaranteed in any way.
