Investors fearful that the eurozone will collapse under the weight of debt will test the willingness of the Swiss National Bank to curb safe-haven inflows to the Swiss franc, according to JP Morgan Private Bank.

The latest woes of the eurozone “could not have come at a worse time for the SNB. This could even give some investors an incentive to test the SNB, already", Audrey Childe- Freeman, global head of currency strategy and César Pérez, EMEA chief investment strategist, say in a regular currency forecast note.

Around a month ago, the SNB announced it will buy unlimited amounts of foreign currencies to cap the euro/Swiss rate at SFr1.20. Even that level is around 20 per cent above fair value, JP Morgan says.

As well as being important for Swiss exporters in the engineering, chemicals and luxury goods sector, the strength of the country’s currency over the past two years or so has been a headache for the country’s big wealth management houses. UBS, Credit Suisse, Julius Baer, Pictet, Sarasin and EFG have all mentioned headwinds caused by the Swiss franc, as these firms earn significant revenues from abroad.

JP Morgan says it has become more bearish on the Swiss franc since its previous forecast at the end of the second quarter of 2011, with a year-end target of 1.176 against the euro and 0.8 against the dollar.

“At a time when prospects for the world economy have deteriorated significantly and with policy makers running out of ammunition, currency trends have become increasingly important. In fact, it may be argued that we have re-entered a ‘currency war zone’. Currency levels are particularly relevant for small, open economies such as Switzerland,” the bank says.

Chemicals (49 per cent) and machinery equipment/electronics (22 per cent) represent the bulk of the export sector. It is also important to note that the aggregated European bloc (i.e including the UK) represents 59 per cent of total Swiss exports, according to the JP Morgan note. A pie chart of exports does not mention financial services. Watches account for 11 per cent of exports.