- The USD/CHF remains stable around 0.8810 in the early European session on Tuesday.
- Geopolitical risks in the Middle East could boost the flows to shelter, benefiting the Swiss Franco.
- Decisions on the interest rates of the FED and the BNS will be the points highlighted later this week.
The USD/CHF pair operates in a flat tone about 0.8810 during the early European session on Tuesday. The torque potential could be limited due to the growing economic uncertainty and the growing geopolitical tensions in the Middle East.
The US dollar index (DXY), an index of the USD value in relation to a foreign currency basket, currently rises to 103.55, adding 0.13% in the day. The dollar received support from US retailers sales on Monday, which showed a modest rebound in February after a 1.2% reviewed fall in January.
The markets expect the US Federal Reserve (FED) to maintain interest rates at its March meeting on Wednesday, with the next cut in June. The US Central Bank will give its new economic projections after the decision on the fees, which could offer some clues about how officials see the probable impact of US President Donald Trump’s policies and the US economic perspectives.
On the other hand, the growing geopolitical tensions in the Middle East could boost shelter license such as the Swiss Franco (CHF) and create a wind against the USD/CHF. On Tuesday, Israeli Prime Minister Benjamin Netanyahu said in a statement: “From now on, Israel will act against Hamas with a growing military force.” The order was issued after the militant group refused to free our hostages and rejected all the offers he received from the US presidential envoy and the mediators.
It is anticipated that the Swiss National Bank (BNS) trim its main policy rate in a quarter percentage point on Thursday to 0.25% and keep it there until at least 2026, according to most economists surveyed by Reuters. “Previously, there seemed to be a reasonable possibility that the BNS cut to zero or less, but those possibilities now seem scarce,” said Adrian Prettejohn, an economist from Europe in Capital Economics.
India Faqs Rupia
Indian rupee (INR) is one of the most sensitive currencies to external factors. The price of crude oil (the country depends largely on imported oil), the value of the US dollar (most of the trade is carried out in US dollars) and the level of foreign investment are all influential factors. The direct intervention of the Bank of the Reserve of India (RBI) in the currency markets to keep the exchange rate stable, as well as the level of the interest rates set by the RBI, are other important factors that influence the rupee.
The Bank of the Reserve of India (RBI) actively intervenes in the currency markets to maintain a stable exchange rate and help facilitate trade. In addition, the RBI tries to maintain the inflation rate in its 4% target adjusting interest rates. Higher interest rates often strengthen rupee. This is due to the role of the “Carry Trade”, in which investors borrow in countries with lower interest rates to place their money in countries that offer relatively higher interest rates and benefit from difference.
Macroeconomic factors that influence the value of rupee include inflation, interest rates, economic growth rate (GDP), trade balance and foreign investment tickets. A higher growth rate can lead to greater investment abroad, increasing the demand for rupee. A less negative trade balance will eventually lead to a stronger rupee. The highest interest rates, especially real types (less inflation interest rates) are also positive for rupee. A risk environment can generate higher direct and indirect foreign investment entries (FI and FII), which also benefit the rupee.
Higher inflation, particularly if it is comparatively higher than other countries, is generally negative for the currency, since it reflects a devaluation through excess supply. Inflation also increases the cost of exports, which leads to more rupees to buy foreign imports, which is negative for Indian rupee. At the same time, higher inflation usually leads to the Bank of the Reserve of India (RBI) to raise interest rates and this can be positive for rupee, due to the increase in demand for international investors. The opposite effect applies to lower inflation.
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.
