Dollar Steadies Near May 2025 Levels as Fed-SNB Divergence Continues
The USD/CHF exchange rate has remained steady near May 2025 levels despite the US dollar's recent decline, according to VT Markets. The pair held at around 0.8285 on Friday, marking a fourth consecutive weekly gain for the cross.
The Swiss franc has lagged behind most major currencies this year due to the Federal Reserve's hawkish stance and the Swiss National Bank's (SNB) 0% policy rate. The SNB kept its policy unchanged on Thursday, stating that its current stance is appropriate to keep inflation within a stable range while supporting economic development.
The Fed, in contrast, raised rates by 25 basis points to 3.75%-4.00%, with projections showing 16 of 18 policymakers expecting at least one more increase this year. The US Dollar Index hovered around 101 after reaching 101.40, and the 10-year Treasury yield remained near 5.17% after peaking at 5.22%, a level not seen since 2007.
VT Markets advises derivative traders to exploit the widening interest rate differential by purchasing medium-term USD/CHF call options, citing the franc's role as an ideal funding currency for carry trades. They also suggest utilizing bull call spreads to mitigate premium decay and capturing upside gains if the Fed's October rate hike becomes reality.