Swiss Franc advances after recent sell-off, SNB in focus
- USD/CHF falls for a third straight day as traders book profits following its recent rally.
- Hawkish Fed expectations support the US Dollar, while lower Treasury yields limit the upside.
- Traders await Thursday’s SNB decision, with economists expecting the policy rate to stay at 0%.
USD/CHF extends its pullback on Monday after climbing to 0.8263 last week, its highest level since May 2025. The Swiss Franc (CHF) regains some ground even as the US Dollar (USD) holds firm near recent highs, with traders likely booking profits following the pair’s one-sided rally from near the 0.8000 psychological mark in mid-August.
At the time of writing, USD/CHF trades around 0.8209, falling for a third straight day as attention shifts to the Swiss National Bank’s policy decision on Thursday.
The US Dollar Index, which tracks the Greenback against a basket of six major currencies, trades around 100.40, close to the seven-week high of 100.56 touched on Friday. Hawkish Federal Reserve (Fed) expectations support the near-term outlook for the US Dollar.
However, a modest pullback in US Treasury yields, driven partly by falling Oil prices, limits the Greenback’s advance. The benchmark 10-year US Treasury yield trades around 4.96%, below the 5.04% level touched last week, its highest since 2007. West Texas Intermediate (WTI) Oil trades around $92, falling for a fourth consecutive day and touching its lowest level in more than a week.
Despite the recent decline, Oil prices remain well above pre-war levels and continue to add to inflationary pressure. Against this backdrop, the Fed delivered its first rate hike in three years last week, raising the federal funds rate by 25 basis points to 3.75%–4.00%.
Most Fed policymakers also leaned hawkish, with the latest dot plot showing that 16 of 18 officials expect at least one more rate hike this year. The central bank is trying to bring inflation back to its 2% target in a timely manner, keeping the prospect of additional tightening firmly on the table.
Chicago Fed President Austan Goolsbee said on Monday that he would have no problem with interest rates moving lower if there is “convincing evidence inflation is heading back to 2%.”
On the Swiss side, inflation remains near the lower end of the SNB’s price-stability range, supporting the case for keeping the policy rate at 0%. The central bank is widely expected to leave rates unchanged when it announces its decision on Thursday.
A Reuters poll published on Monday showed that all 35 economists expect the SNB to hold its policy rate at 0% on September 24. Sixteen of 24 economists also expect the central bank to keep rates unchanged through 2027.
The wide interest-rate gap between the United States and Switzerland could limit additional gains in the Swiss Franc, which remains one of the worst-performing major currencies this year. The SNB’s readiness to intervene against excessive currency strength also limits demand for the Franc.
SNB FAQs
The Swiss National Bank (SNB) is the country’s central bank. As an independent central bank, its mandate is to ensure price stability in the medium and long term. To ensure price stability, the SNB aims to maintain appropriate monetary conditions, which are determined by the interest rate level and exchange rates. For the SNB, price stability means a rise in the Swiss Consumer Price Index (CPI) of less than 2% per year.
The Swiss National Bank (SNB) Governing Board decides the appropriate level of its policy rate according to its price stability objective. When inflation is above target or forecasted to be above target in the foreseeable future, the bank will attempt to tame excessive 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.
Yes. The Swiss National Bank (SNB) has regularly intervened in the foreign exchange market in order to avoid the Swiss Franc (CHF) appreciating too much against other currencies. A strong CHF hurts the competitiveness of the country’s powerful export sector. Between 2011 and 2015, the SNB implemented a peg to the Euro to limit the CHF advance against it. The bank intervenes in the market using its hefty foreign exchange reserves, usually by buying foreign currencies such as the US Dollar or the Euro. During episodes of high inflation, particularly due to energy, the SNB refrains from intervening markets as a strong CHF makes energy imports cheaper, cushioning the price shock for Swiss households and businesses.
The SNB meets once a quarter – in March, June, September and December – to conduct its monetary policy assessment. Each of these assessments results in a monetary policy decision and the publication of a medium-term inflation forecast.
Author
Vishal Chaturvedi
FXStreet
I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.
