(Bloomberg) -- The Swiss franc jumped to the highest level against the dollar in over eight years after a softer-than-expected US inflation print dragged the greenback.

The currency gained as much as 1.5% to 0.8660 per dollar on Wednesday, reaching a level last seen in January 2015. Back then, the Swiss National Bank had just scrapped a three-year policy of capping its gains against the euro, spurring an explosive rally in the franc.

The franc — both a haven and funding currency for carry trades — has been on a rally since late last year amid expectation Switzerland’s interest-rate differential to the US will continue to narrow. The SNB has raised rates by 250 basis points in the current tightening cycle to 1.75% and has sent strong signals that another hike will come at officials’ next scheduled meeting in September.

“The sharp correction in developed rates after the US CPI miss raises the prospects that the terminal SNB rate may not lag as far behind as initially thought,” said Alexandre Dolci, G-10 FX strategist at Credit Agricole. 

The franc is up 6.5% against the dollar and 2.7% versus the euro this year, making it the second best performing currency in the Group-of-10. 

The SNB has been selling foreign currency as part of its efforts to cool inflation, which it expects to average 2.2% both this year and next, above the 2% ceiling it targets. At the last policy meeting, policymakers said they “remain willing to buy foreign currency in the event of excessive appreciation pressure on the Swiss franc,” though they noted in the current environment the focus is still on selling. 

The authority declined to comment on Wednesday’s market moves. Vice President Martin Schlegel last week said additional rate increases aimed at inflation don’t threaten financial stability. 

The SNB removed its cap of 1.20 franc per euro in the first days of 2015 in an attempt to reinforce its defenses of the economy. The pair rapidly fell below 0.90 before gradually returning to the cap level in 2018. 

--With assistance from Vassilis Karamanis, Bastian Benrath, Naomi Tajitsu and Elizabeth Stanton.

(Updates with context, strategist comment and market moves throughout.)

©2023 Bloomberg L.P.