Swiss Franc advances as Dollar slides on US bond buyback surge
- USD/CHF falls as the US Dollar declines following unexpected fiscal policy moves to cap rising Treasury bond yields.
- US Treasury Secretary Scott Bessent signaled buybacks over $4 billion to show elevated yields mismatch true economic fundamentals.
- SNB policy rate remains at 0% with plans to intervene against excessive Franc appreciation.
USD/CHF depreciates after two days of gains, trading around 0.8000 during the Asian hours on Monday. The currency pair depreciates as the US Dollar (USD) struggles under pressure from newly announced fiscal measures in Washington.
Financial markets were caught off guard when the US Treasury Department pledged to at least double its buybacks of longer-dated government debt to curb rising bond yields. Treasury Secretary Scott Bessent indicated that these buybacks could exceed $4 billion, representing a strategic push to signal that elevated yields fail to accurately reflect underlying economic fundamentals.
Low volatility seen underpinning renewed interest in carry trades
Analysts at ING argue that the US authorities’ greater focus on supporting the Treasury market should be interpreted as a “risk-positive story,” with the bank expecting that “volatility will stay low, and interest will remain firm in the carry trade.” This backdrop, in their view, continues to favour strategies that lean on stable funding conditions and subdued market swings.
However, the Greenback's downside may be constrained by rising safe-haven demand driven by escalating geopolitical tensions in the Middle East. Friction intensified after Iranian Foreign Minister Abbas Araghchi dismissed upcoming US sanctions as an act of desperation, while Iranian Security Chief Mohsen Rezaei warned of "earthquake-like" retaliation if US President Donald Trump takes further action, reinforcing a risk-off mood across global markets.
Meanwhile, the Swiss National Bank (SNB) kept its policy rate at 0% and is expected to maintain this stance through 2027, reaffirming its readiness to intervene in foreign exchange markets to curb excessive franc appreciation. While most economists anticipate the first-rate hike in early 2028, markets are already pricing in a move as early as March 2027, a shift that could make the Franc increasingly attractive as a funding currency for carry trades.
Technical Analysis:
In the daily chart, USD/CHF trades at 0.8000, keeping a bearish near-term tone as price holds below both the short- and medium-term Exponential Moving Averages (EMAs). The alignment of the EMAs above spot suggests the pair remains capped, while the 14-day Relative Strength Index (RSI) around 40 hints at lingering downside pressure without yet reaching oversold conditions.
On the topside, initial resistance is seen at the nine-EMA near 0.8049, followed by the 50-EMA at 0.8060, which together form a tight overhead supply zone that bulls would need to reclaim to ease the current bearish bias. With no nearby structural supports in the data, any further slide from current levels would leave the pair seeking new demand zones below 0.8000, keeping risks skewed to the downside while it trades under these moving averages.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
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.
Nothing in this material constitutes investment advice, personal recommendation, investment research, an offer, or a solicitation to buy or sell any financial instrument. The content has been prepared without consideration of your individual investment objectives, financial situation, or needs, and should not be treated as such.
Past performance is not a reliable indicator of future performance and/or results. Forward-looking scenarios or forecasts are not a guarantee of future performance. Actual results may differ materially from those anticipated.
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