20/05/26

30

USD/CHF extended its advance for a second straight session on Wednesday, trading near 0.7890 in Asian hours. The pair remained supported by broad demand for the US dollar as investors sought safety amid renewed geopolitical tension in the Middle East. Caution increased after reports indicated that the US president had warned of the possibility of renewed strikes on Iran within days as part of efforts to force a deal to end the conflict.

The escalation has added to concerns that energy prices could rise further, intensifying inflation pressure in the United States. Earlier gains in oil have reinforced the view that the Federal Reserve may need to keep interest rates elevated for longer and could still face pressure to tighten policy further if price risks persist. That outlook has helped support the dollar while also lifting US bond yields as markets reassess the inflation outlook.

Treasury yields remained near recent highs, reflecting the same concerns. The 30-year yield eased slightly to 5.181% after touching 5.200%, its highest level in nearly 19 years. The 10-year yield held close to 4.687%, near a 16-month peak, while the 2-year yield stayed around 4.139%, after reaching its highest point in 15 months. The persistence of elevated yields has underscored the market’s belief that rates may stay restrictive for an extended period.

In Switzerland, preliminary economic data offered a more constructive backdrop for the domestic currency. Gross domestic product rose 0.5% quarter-on-quarter in the first quarter, improving from 0.2% in the previous period and marking the strongest quarterly expansion in a year. The figure points to a gradual recovery in the Swiss economy, even as external risks remain elevated.

Market participants are now looking ahead to first-quarter industrial production data due on Thursday. That release may provide additional clues on whether the recovery is broadening beyond the latest GDP reading. For now, however, the dollar’s safe-haven appeal and firmer US rate expectations appear to be outweighing the support from stronger Swiss data.