USD/CHF rises to near 0.7900 as US Dollar holds ground amid Middle East conflicts

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The USD/CHF pair is up 0.15% to near 0.7895 during the Asian trading session on Wednesday. The Swiss Franc pair gains as the US Dollar (USD) continues to hold ground amid conflicts in the Middle East, which involve the United States (US), Israel, and Iran.

USD/CHF gains to near 0.7895 as Middle East conflicts continue to offer support to the US Dollar.
Iran continues to deny any direct talks with the US regarding the end of the Middle East war.
The SNB could intervene against the Swiss Franc’s appreciation soon.

As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.12% higher to near 99.30.

The US Dollar holds ground as Iran continues to deny involvement in any direct talks with the US regarding the end of the war in the Middle East. Meanwhile, increasing optimism that conflicts would end soon, following comments from US President Donald Trump that Tehran is eager to end the war, has improved market sentiment.

S&P 500 futures are 0.6% higher in the Asian trade after a slight decline on Tuesday, indicating a risk-on market mood. Asian stock markets are also trading higher as of writing.

On the domestic front, flash US S&P Global Purchasing Managers’ Index (PMI) data for March has shown a slowdown in the services sector activity, which has dragged the Composite PMI.

Meanwhile, the Swiss Franc (CHF) trades lower against its major currency peers, except antipodeans, as the Swiss National Bank (SNB) continues to warn of stealth intervention against significant appreciation in the domestic currency.

SNB FAQs

What is the Swiss National Bank?

The Swiss National Bank (SNB) is the country’s central bank. As an independent central bank, its mandate is to ensure price stability in the medium and long term. To ensure price stability, the SNB aims to maintain appropriate monetary conditions, which are determined by the interest rate level and exchange rates. For the SNB, price stability means a rise in the Swiss Consumer Price Index (CPI) of less than 2% per year.

How does the Swiss National Bank interest-rate policy affect the Swiss Franc?

The Swiss National Bank (SNB) Governing Board decides the appropriate level of its policy rate according to its price stability objective. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame excessive 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.

Does the Swiss National Bank intervene in the forex market?

Yes. The Swiss National Bank (SNB) has regularly intervened in the foreign exchange market in order to avoid the Swiss Franc (CHF) appreciating too much against other currencies. A strong CHF hurts the competitiveness of the country’s powerful export sector. Between 2011 and 2015, the SNB implemented a peg to the Euro to limit the CHF advance against it. The bank intervenes in the market using its hefty foreign exchange reserves, usually by buying foreign currencies such as the US Dollar or the Euro. During episodes of high inflation, particularly due to energy, the SNB refrains from intervening markets as a strong CHF makes energy imports cheaper, cushioning the price shock for Swiss households and businesses.

When does the Swiss National Bank Governing Council decide on monetary policy?

The SNB meets once a quarter – in March, June, September and December – to conduct its monetary policy assessment. Each of these assessments results in a monetary policy decision and the publication of a medium-term inflation forecast.