USD/CHF falls to near 0.7850 as US Dollar weakens despite safe-haven demand

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USD/CHF remains subdued for the second successive day, trading around 0.7840 during the Asian hours on Monday. The pair struggles as the US Dollar (USD) extends its losses despite increased safe-haven demand.

USD/CHF faces pressure as the US Dollar continues to weaken despite rising safe-haven demand.
President Trump canceled a planned delegation to Pakistan for potential direct talks with Iran.
SNB’s Schlegel says that the central bank is ready to adjust policy and intervene to curb CHF strength.

The downside in the Greenback could be restrained as the ceasefire comes under strain, with Israel and Hezbollah escalating attacks despite a US-brokered extension meant to halt fighting for three weeks.

US President Donald Trump called off that delegation to Pakistan to potentially discuss directly with Iran. Trump on Saturday told Jared Kushner and Steve Witkoff to skip the trip to Pakistan, which is mediating talks, saying that Iran “offered a lot, but not enough. Iranian President Masoud Pezeshkian stated that his nation won’t enter “imposed negotiations under threats or blockade.”

Bloomberg reported on Monday that Iran gave the US a new proposal to reopen the Strait of Hormuz and end the war, which includes putting off nuclear negotiations. The plan called for extending the ceasefire so both countries can work toward a permanent end to the fighting.

Swiss National Bank (SNB) Chairman Martin Schlegel said at the SNB’s General Meeting that the central bank remains open to policy adjustments and FX intervention, reaffirming its willingness to purchase foreign currencies to weaken the Swiss Franc (CHF). Schlegel added that Switzerland’s outlook has become more uncertain, with muted near-term growth and rising inflation expected as energy costs increase.

Swiss Franc FAQs

What key factors drive the Swiss Franc?

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.

Why is the Swiss Franc considered a safe-haven currency?

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.

How do decisions of the Swiss National Bank impact the Swiss Franc?

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.

How does economic data influence the value of the Swiss Franc?

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.

How does the Eurozone monetary policy affect the Swiss Franc?

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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