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(Bloomberg) — The Swiss National Bank has the one thing that most central banks are desperate for right now as they battle inflation: a strong currency. That advantage is waning as the European Central Bank considers a jumbo rate hike next week. 

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The Swiss franc has been on a tear against the euro this summer, gaining more than 7% from the beginning of June to mid-August, as rampant price increases and rising odds of a recession in the euro-area drove investors to one of the world’s most popular currency havens. 

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But that trade was put to the test this week, with the franc falling 2% from its August record of 1.0429 after hawkish comments by ECB speakers prompted money-market traders to price in a 75 basis-point rate hike. That would widen the rate differential between the two currencies, with the SNB still in negative interest-rate territory at least until its next meeting on Sept. 21. 

That’s prompted some traders to start unwinding long franc positions, even though the war in Ukraine, Europe’s energy crisis, high inflation and slowing growth encourage bearishness toward the common currency, according to Bank of New York Mellon Corp.’s Head of Markets Strategy Daniel Tenengauzer.

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“Traders are wondering, does it really make sense to take exposure to the Swiss franc?” said Tenengauzer.

After surpassing parity with the franc in March for the first time since 2015, when the SNB unexpectedly abandoned its peg of 1.20 francs per euro, the common currency has declined further against its Swiss counterpart, trading as low as 0.95 last week.

“As long as geopolitics are weighing on the euro, the Swiss franc will be a beneficiary,” said Alan Ruskin, Deutsche Bank AG’s chief international strategist.  

Buying the franc against the common currency became a popular trade this year thanks to the SNB’s shift in focus from economic growth to inflation. SNB President Thomas Jordan said in December that limiting currency-market interventions and allowing the franc to strengthen had helped officials curb price pressures. 

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In June, the SNB amped it up a notch, surprising the world by raising its policy rate by 50 basis points, its first hike since 2007. The central bank also committed to buying the franc if it weakened too much. The move caused the currency to soar to its highest level in seven years.

To be sure, an abrupt U-turn by the SNB could suddenly make the franc an expensive haven as the currency has little positive carry. 

“We’re currently at levels where all of a sudden that intervention risk is serious,” said Simon Harvey, head of FX analysis at Monex Europe. “Why take that risk for such marginal gains?”

But other factors are still supporting the franc. Economic turbulence in Europe has worsened. Inflation is above 9% compared to Switzerland’s 3.5% rate, helping the franc to act a hedge against price growth. The country is also less dependent on Russia for gas supplies, and is traditionally neutral in regional conflicts. That’s boosting the currency’s traditional role as a place to wait out market storms.

“The Swiss economy has been really well run,” said Stephen Jen, the London-based chief executive of hedge fund Eurizon SLJ Capital Ltd. “It has a huge account surplus, capital inflows. People want to hide in Swiss. In terms of safety, you know where your money is.”