USD Rises Against CHF as Safe-Haven Flows Boost Demand for US Dollar
The US Dollar (USD) has continued its upward trend against the Swiss Franc (CHF), reaching levels around 0.8130 for a second consecutive session. This move is largely driven by increased safe-haven interest in the USD, fueled by heightened Middle East tensions and rising US Treasury yields and oil prices.
The Strait of Hormuz has become a major point of concern, with Saudi Arabia planning to extend its military operations against Iranian-aligned Houthis in support of the internationally recognized Yemeni government. Meanwhile, Iran's parliament is considering a draft bill that would restrict use of the corridor until the US blockade is lifted.
Despite these geopolitical tensions, market participants are also keeping a close eye on the Federal Reserve's upcoming decision on interest rates. The CME FedWatch Tool currently indicates a 54.5% chance of a 25-basis-point hike in September, down from 63.4% a week earlier.
The Swiss National Bank (SNB) has kept its policy rate at 0.00%, which is contributing to the Franc's weakness. With Swiss inflation running at just 0.4% year-on-year and core at 0.3%, strategist Elias Haddad notes that this soft inflation setting is likely to keep the Franc under pressure.