- USD/CHF climbs as the US Dollar rebounds from daily losses, bolstered by rising Treasury yields.
- The US Dollar faced headwinds amid growing concerns over a potential economic slowdown in the United States.
- The Swiss Franc weakens as improved risk sentiment reduces demand for safe-haven assets.
USD/CHF extends its winning streak for the fourth consecutive session, trading near 0.8840 during Asian hours on Monday. The pair gains as the US Dollar (USD) recovers its daily losses, supported by rising Treasury yields amid a hawkish tone surrounding the Federal Reserve (Fed). Last week, Fed Chair Jerome Powell noted, “Labor market conditions are solid, and inflation has moved closer to our 2% longer-run goal, though it remains somewhat elevated.”
The US Dollar Index (DXY), which measures the USD against six major currencies, continues to rise, hovering around 104.10. Meanwhile, yields on US 2-year and 10-year Treasury bonds stand at 3.97% and 4.28%, respectively.
However, the USD faced some pressure amid concerns over a potential US economic slowdown, driven by trade policies under President Trump. Investors now await the preliminary reading of the US S&P Global PMI data for March, set for release later in the North American session.
The Swiss Franc (CHF) may be under downward pressure due to improved risk sentiment, reducing demand for safe-haven assets. This shift follows reports that the White House is adjusting its tariff strategy ahead of the April 2 implementation, according to the Wall Street Journal. Additionally, geopolitical tensions have eased, with Ukrainian and US officials meeting in Riyadh on Sunday to discuss peace efforts, while President Trump continues to advocate for an end to the three-year war.
The Swiss National Bank (SNB) lowered its key policy rate to 0.25% on Thursday, its lowest level since September 2022. Although the move was widely anticipated, the SNB refrained from committing to a specific policy path. Policymakers emphasized that lower borrowing costs are necessary to align monetary conditions with subdued inflationary pressure.
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
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