- The USD/ChF advances while the US dollar finds support in the middle of a greater caution in the market before the Trump tariffs on April 2.
- The dollar benefits as the yields of US bonds 2 and 10 years rise to 4.01% and 4.33%, respectively.
- The Swiss Franco won ground amid the climbing of geopolitical tensions in the Middle East.
The USD/CHF pair bounces after two consecutive days of losses, quoting around 0.8840 during the Asian hours on Wednesday. The torque is strengthened as the US dollar (USD) finds support in the middle of the caution of the market before the next announcement of tariffs of US President Donald Trump on April 2.
The dollar index (DXY), which measures the USD compared to six main currencies, is recovered from recent losses and remains around 104.30. The dollar gains impulse as the yields of the US Treasury bonds increase, with the yields of the bonds at 2 and 10 years of 4.01% and 4.33%, respectively, at the time of writing.
The hard line statements of the Governor of the Federal Reserve (Fed), Adriana Kugler, further reinforce the USD. On Tuesday, Kugler reiterated that Fed’s monetary policy is still restrictive and is properly positioned. He also pointed out that progress towards the inflation objective of 2% has slowed since last summer, highlighting the recent increase in inflation of goods as “little useful.”
The Swiss National Bank (SNB) on Monday reported that the Swiss current account surplus was reduced to 9.8 billion CHF in the fourth quarter of 2024, compared to 13.8 billion CHF in the same period of the previous year. Meanwhile, the services account deficit was extended to 9.4 billion CHF from 8.7 billion, while the assets account surplus grew to 30 billion CHF from 27.9 billion a year earlier.
In addition, geopolitical tensions in the Middle East could boost the demand for safe refuge for the Swiss Franco (CHF). Israel has resumed the air attacks in Gaza after a high fire of almost two months with Hamas. Prime Minister Benjamin Netanyahu has promised to climb military operations to ensure the release of hostages and dismantle Hamas.
Franco Swiss faqs
The Swiss Franco (CHF) is the official currency of Switzerland. It is among the ten most negotiated coins worldwide, reaching volumes that far exceed the size of the Swiss economy. Its value is determined by the general feeling of the market, the country’s economic health or the measures taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franco was linked to the euro (EUR). The link was eliminated abruptly, which resulted in an increase of more than 20% in the value of the Franco, which caused a turbulence in the markets. Although the link is no longer in force, the fate of the Swiss Franco tends to be highly correlated with that of the euro due to the high dependence of the Swiss economy of neighboring Eurozone.
The Swiss Franco (CHF) is considered a safe shelter asset, or a currency that investors tend to buy in times in markets. This is due to the perception of Switzerland in the world: a stable economy, a strong export sector, great reserves of the Central Bank or a long -standing political position towards neutrality in global conflicts make the country’s currency a good option for investors fleeing risks. It is likely that turbulent times strengthen the value of the CHF compared to other currencies that are considered more risky to invest.
The Swiss National Bank (BNS) meets four times a year (once each quarter, less than other important central banks) to decide on monetary policy. The bank aspires to an annual inflation rate of less than 2%. When inflation exceeds the objective or it is expected that it will be overcome in the predictable future, the bank will try to control the growth of prices raising its type of reference. The highest interest rates are usually positive for the Swiss Franco (CHF), since they lead to greater returns, which makes the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken the CHF.
Macroeconomic data published in Switzerland are fundamental to evaluate the state of the economy and can affect the assessment of the Swiss Franco (CHF). The Swiss economy is stable in general terms, but any sudden change in economic growth, inflation, current account or foreign exchange reserves have the potential to trigger movements in the CHF. In general, high economic growth, low unemployment and a high level of trust are good for Chf. On the contrary, if the economic data suggests to a weakening of the impulse, the CHF is likely to depreciate.
As a small and open economy, Switzerland depends largely on the health of the neighboring economies of the Eurozone. The European Union as a whole is the main economic partner of Switzerland and a key political ally, so the stability of macroeconomic and monetary policy in the Eurozone is essential for Switzerland and, therefore, for the Swiss Franco (CHF). With such dependence, some models suggest that the correlation between the fate of the euro (EUR) and the Swiss Franco is greater than 90%, or almost perfect.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
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