The Swiss franc rallied to a one-month high against the euro on Wednesday as hedge funds unwound some of their negative bets against the currency and as appetite for risky assets faltered due to the intensifying unrest in Hong Kong.

A speech by U.S. President Donald Trump where he threatened to raise tariffs on China and criticised European Union trade policies before a Nov. 14 deadline to decide whether to raise tariffs on European and Japanese carmakers also boosted demand for the negative-yielding Swiss currency.

Hedge fund and banks had ramped up their bearish bets against the Swiss franc over the last two weeks on expectations a trade pact between Washington and Beijing would fuel demand for risky assets and boost carry-trades where investors borrow in cheap currencies such as the franc and yen and invest in riskier ones like the dollar and the pound.

“It feels that the market has been getting itself short Swiss franc the past 2 weeks on back of the rally in risk and there should be more downside in the euro/franc and the dollar/franc,” said a sales trader at a European bank in London.

Against the euro, the franc gained as much as 0.3% versus the euro to 1.0904 francs per euro, strengthening to its highest levels since Oct. 9 while it gained by a similar margin against the dollar.

The franc’s gains were also bolstered by latest weekly data which showed the Swiss central bank had loosened its grip on the currency by stepping back from its interventionist stance.

“The latest sight deposit data suggests the SNB is taking a backseat in currency intervention in the short term but that analysis must be taken with a pinch of salt,” said Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets.


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