USD Dances Around CHF Amidst Interest Rate Hikes and Safe-Haven Demand

The US dollar has been experiencing a seesaw effect against the Swiss franc on Tuesday, influenced by both interest rate differentials and safe-haven demand.

The pair has been fluctuating around the 0.81 level, which is acting as a fulcrum for price. The US dollar is receiving some support due to high Treasury yields, with the 10-year yield at 4.79%, following last Friday's strong employment numbers that have increased the probability of a September Fed rate hike to approximately 60%.

However, there are some headwinds for the dollar, as traders are cutting their long positions ahead of upcoming inflation data releases on Thursday and Friday. The broader dollar index has struggled below 99 due to this.

The Swiss franc is receiving fundamental support beyond its safe-haven status due to stronger-than-anticipated inflation numbers in Switzerland and Q2 GDP figures. Additionally, the deterioration in Middle Eastern conditions has led to increased safe-haven demand for the Swiss franc.