US Dollar Falters Despite Strong CPI Data, USD/CHF Holds Firm

The US Dollar Index (DXY) briefly touched 99.36 after the release of the latest Consumer Price Index (CPI) report, but a pullback in US Treasury yields and Oil prices tempered demand for the Greenback despite increased rate-hike expectations.

According to the CME FedWatch Tool, markets now price in an 85% chance of the Federal Reserve raising borrowing costs at the September 15-16 meeting, up from 67% earlier in the day. However, preliminary data from the University of Michigan showed that Consumer Sentiment Index fell to 47.8 in September from 51.7.

Despite this, USD/CHF holds firm, with the pair trading around 0.8150 after touching an intraday high of 0.8170, its highest level since July 30. The Swiss Franc underperforms its major peers due to SNB intervention risks and Switzerland's low interest rates.

SNB Chairman Martin Schlegel said that 'the Swiss Franc exchange rate is a challenge for the Swiss economy,' reinforcing expectations that the central bank is prepared to intervene if the currency appreciates sharply. This would leave Swiss interest rates even further behind those in other major economies, encouraging investors to favour higher-yielding currencies.