USD/CHF Sees Pullback as Swiss Franc Regains Ground
The USD/CHF pair saw some pullback on Thursday as the Swiss Franc regained some ground after six consecutive days of losses. The US Dollar buyers took a breather following the Federal Reserve's (Fed) hawkish monetary policy announcement earlier in the week.
The Fed raised its benchmark rate by 25 basis points to 3.75%-4.00%, with 16 out of 18 policymakers expecting at least one more quarter-point increase before the end of the year. This prospect may widen the interest rate gap between the US and Switzerland, where the Swiss National Bank keeps its policy rate at zero.
This difference in interest rates could continue to make US Dollar-denominated assets attractive, keeping the Swiss Franc vulnerable to losses. However, the Swiss Franc has become increasingly popular as a funding currency for carry trades due to expectations that the Bank of Japan may accelerate its rate-hike cycle.
Strategists at UOB Group noted that the latest upswing in USD/CHF exceeded their prior expectations, but cautioned that it's too early to tell if the momentum is sufficient to break above 0.8300. They highlighted a pivotal level of 0.8185, which would indicate easing upside momentum from late last week.