Swiss Franc Outruns Yen And Dollar As Safe Haven Rules Shift

Swiss Franc Leads Safe Haven Currencies As FX Volatility Rises

On February 13, 2026, investors rotating into defensive assets have increasingly treated the Swiss franc as the first-choice refuge, while the Japanese yen has strengthened in bursts and the U.S. dollar has struggled to deliver its usual hedge. The market relevance is direct: when safe haven currencies behave differently, hedging costs change quickly for global equity portfolios, and the knock-on effects show up in rates, credit spreads, and commodity positioning.

The dollar has fallen about 0.7% on the week even as U.S. data kept rate expectations firm. The yen is on track for its strongest weekly gain in more than 15 months, rising about 2.7% versus the dollar, a move that has tightened financial conditions for Japan’s exporters and forced fast adjustments in carry trade exposure.

Why The Swiss Franc Has Become The “Default” Refuge

The Swiss franc strength story is rooted in balance-sheet optics and policy credibility. Switzerland runs a persistent external surplus, has a reputation for conservative fiscal management, and typically carries lower political-risk pricing than peers. When risk appetite fades, flows into francs can be self-reinforcing because many macro funds view the currency as a clean hedge that does not require an active view on growth.

That demand can be uncomfortable for Switzerland. A rapidly rising franc tightens conditions by lowering imported inflation and squeezing exporters’ margins, a problem when domestic price growth is already subdued. For markets, the mechanism matters because it raises the probability of Swiss National Bank communication designed to slow appreciation, which can add headline-driven FX volatility even without a policy-rate change.

Yen Safe-Haven Support Is Back, But It Is Not Linear

The yen has regained safe-haven support as investors unwind leverage and reduce overseas risk in periods of market stress. A separate factor has helped in 2026: Japan’s political calendar has reduced immediate fiscal fears, and that has pulled some capital back toward yen assets. The yen’s roughly 2.7% weekly rise against the dollar has been large enough to force hedging updates for international investors who run Japan equity exposure unhedged.

The currency’s behavior is still conditional. When global yields surge and risk is stable, the yen can weaken as carry strategies rebuild. When risk appetite breaks, the unwind can be abrupt, and that is why Japanese yen safe-haven behavior tends to show up in sharp, short windows rather than a smooth trend.

The Dollar’s Safe-Haven Role Is Being Repriced

The most consequential change is the debate around the dollar’s protection value when the stress is perceived to originate in the United States rather than abroad. In that setup, foreign investors can reduce U.S. equity exposure and simultaneously hedge or sell dollars, weakening the traditional negative correlation between stock drawdowns and dollar strength.

George Saravelos, global head of foreign exchange research at Deutsche Bank, argued this month that the dollar does not reliably rally during ordinary equity declines when the perceived risk source is domestic, warning that the hedge can fail unless funding stress becomes severe. That view has been amplified by recent episodes where the U.S. Dollar Index slipped while equity volatility increased.

Market Channels: Equities, Rates, Credit, Commodities, And Volatility

Currency moves of this size quickly feed into equities through earnings translation. A stronger franc pressures Swiss exporters and can weigh on European cyclicals with Swiss production footprints. A stronger yen typically hurts Japan’s large-cap exporters, while it can support domestically oriented sectors that benefit from improved purchasing power.

In rates, safe-haven demand shows up in bond buying. When francs and yen are bid, Swiss and Japanese government bond demand can rise, while U.S. Treasuries may not receive the same marginal “risk-off” bid if investors are simultaneously trimming U.S. exposure. That can steepen or flatten curves depending on whether the driver is growth fear or policy uncertainty.

Credit spreads respond through funding conditions. If the dollar is not providing a hedge, global investors may demand more spread compensation for U.S. corporate risk, particularly in long-duration growth sectors. At the same time, emerging market issuers can face tighter conditions if dollar liquidity becomes less predictable and FX volatility rises.

Commodities are affected through the FX lens. A weaker dollar can support dollar-priced commodities mechanically, but if the move is driven by risk aversion, industrial commodities can still fall on growth concerns. Gold often benefits in this mix, but the path can be choppy when positioning is crowded and margin rules tighten.

Positioning And Hedging Are Now The Key Marginal Buyers

A shift in safe-haven behavior changes how asset managers hedge. If the dollar is viewed as a less reliable hedge, funds may increase allocations to the franc and yen, raising demand for options and pushing up implied FX volatility. That re-pricing can feed back into equities via higher hedging costs for international portfolios, especially for investors running large U.S. allocations from Europe and Asia.

The practical consequence is that “risk-off” no longer means a single, predictable set of trades. Correlations can flip within days, which is why portfolio managers have been spreading hedges across multiple currencies rather than relying on one.

Base Case, Upside Scenario, Downside Scenario

Base Case: Mixed Risk Appetite Keeps FX In Ranges

Base case: risk sentiment remains uneven through late February 2026, and currencies trade in broad ranges. The Swiss franc stays supported, the yen holds recent gains, and the dollar stabilizes if U.S. data keeps rate cuts priced cautiously. The trigger is a lack of fresh policy escalation that would force funds to add hedges aggressively.

Upside Scenario: Risk-Off Pushes Franc And Yen Higher

Upside: a sharper equity drawdown or renewed policy uncertainty drives another wave of defensive buying, and the franc outperforms again while the yen strengthens on carry unwind. Triggers include an abrupt tariff escalation, a jump in implied equity volatility, or wider U.S. credit spreads that signal stress beyond a one-day risk wobble.

Downside Scenario: Higher U.S. Yields Restore Dollar Demand

Downside for the franc and yen: U.S. yields rise further on inflation surprises and risk appetite improves, bringing carry trades back and lifting the dollar through rate differentials. Triggers include a strong inflation print, firmer forward guidance on U.S. rates, and reduced demand for FX hedges as global equities recover.