USD/CHF breaks below 0.8100 near 14-year lows due to rising US economic concerns
- USD/CHF extends its decline as the US Dollar weakens amid escalating concerns over the potential economic impact of US-imposed tariffs.
- The DXY has dropped more than 1%, while the yield on 2-year US Treasury bonds has also declined over 1%.
- The Swiss Franc gains strength as intensifying US-China trade tensions stoke recession fears and boost demand for safe-haven assets.
The USD/CHF pair dropped to 0.8069 during Monday's Asian session, marking its lowest level since September 2011, and is trading around 0.8090. The US Dollar (USD) remains under pressure, weighed down by growing fears of economic fallout from the recently imposed US tariffs.
The US Dollar Index (DXY), which tracks the Greenback against a basket of six major currencies, has fallen over 1% to around 98.30—its weakest level since April 2022. Adding to the pressure, the yield on 2-year US Treasury bonds slid more than 1%, now hovering at 3.75%, reflecting investor caution.
Federal Reserve (Fed) Chair Jerome Powell has warned that the combination of a slowing economy and persistent inflation could challenge the Fed’s goals and heighten the risk of stagflation. Political tension adds another layer of uncertainty, with reports on Thursday indicating President Trump’s growing dissatisfaction with Powell, reportedly even considering his removal. While markets showed little initial reaction, White House economic adviser Kevin Hassett confirmed that the option is being explored.
Swiss markets are closed for the Easter Monday holiday. However, the Swiss Franc (CHF) has strengthened as rising US-China trade tensions increase recession fears and drive demand for safe-haven assets. Meanwhile, President Trump has exempted key tech products—many manufactured in China—from proposed reciprocal tariffs.
Despite this, tensions persist. The White House has imposed new tariffs on Chinese ships docking at US ports, potentially disrupting global shipping lanes. Still, Trump struck a more conciliatory tone late Thursday, noting that China had made several concessions and expressed optimism about reaching a trade deal within three to four weeks. “I don't want to go higher on China tariffs,” he said. “If China tariffs go higher, people won't buy.”
Swiss Franc FAQs
The Swiss Franc (CHF) is Switzerland’s official currency. It is among the top ten most traded currencies globally, reaching volumes that well exceed the size of the Swiss economy. Its value is determined by the broad market sentiment, the country’s economic health or action taken by the Swiss National Bank (SNB), among other factors. Between 2011 and 2015, the Swiss Franc was pegged to the Euro (EUR). The peg was abruptly removed, resulting in a more than 20% increase in the Franc’s value, causing a turmoil in markets. Even though the peg isn’t in force anymore, CHF fortunes tend to be highly correlated with the Euro ones due to the high dependency of the Swiss economy on the neighboring Eurozone.
The Swiss Franc (CHF) is considered a safe-haven asset, or a currency that investors tend to buy in times of market stress. This is due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves or a longstanding political stance towards neutrality in global conflicts make the country’s currency a good choice for investors fleeing from risks. Turbulent times are likely to strengthen CHF value against other currencies that are seen as more risky to invest in.
The Swiss National Bank (SNB) meets four times a year – once every quarter, less than other major central banks – to decide on monetary policy. The bank aims for an annual inflation rate of less than 2%. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame price growth by raising its policy rate. Higher interest rates are generally positive for the Swiss Franc (CHF) as they lead to higher yields, making the country a more attractive place for investors. On the contrary, lower interest rates tend to weaken CHF.
Macroeconomic data releases in Switzerland are key to assessing the state of the economy and can impact the Swiss Franc’s (CHF) valuation. The Swiss economy is broadly stable, but any sudden change in economic growth, inflation, current account or the central bank’s currency reserves have the potential to trigger moves in CHF. Generally, high economic growth, low unemployment and high confidence are good for CHF. Conversely, if economic data points to weakening momentum, CHF is likely to depreciate.
As a small and open economy, Switzerland is heavily dependent on the health of the neighboring Eurozone economies. The broader European Union is Switzerland’s main economic partner and a key political ally, so macroeconomic and monetary policy stability in the Eurozone is essential for Switzerland and, thus, for the Swiss Franc (CHF). With such dependency, some models suggest that the correlation between the fortunes of the Euro (EUR) and the CHF is more than 90%, or close to perfect.
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