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21/07/26
9
USD/CHF Rises as Safe-Haven Demand Lifts Dollar
USD/CHF extended its advance for a second straight session on Tuesday, trading near 0.8110 during Asian hours. The pair drew support from stronger demand for the US dollar as investors sought safe-haven assets amid intensifying tensions between the United States and Iran.
The conflict has helped lift oil prices, adding to concerns that higher energy costs could keep inflation elevated and complicate the outlook for monetary policy. That backdrop has also strengthened speculation that the Federal Reserve may need to remain vigilant on rates for longer than previously expected.
Market pricing reflected that shift in sentiment. According to the CME FedWatch Tool, the probability of a September rate hike rose to 64.2% from 57.8% the previous day. Federal Reserve officials are now in the pre-meeting blackout period ahead of next week’s policy decision, when the central bank is widely expected to leave the federal funds rate unchanged.
Geopolitical risks remain a central market driver. US attacks on Iran have continued for ten days, while retaliatory strikes from Tehran on neighboring countries have further heightened instability across the region. The resulting uncertainty has supported the dollar and weighed on risk-sensitive assets.
The Swiss National Bank has also signaled increased concern over the franc’s strength. While policymakers still view medium-term inflation as stable, recent meeting minutes indicated that short-term price risks have risen because of the broader geopolitical backdrop. The SNB reiterated that it stands ready to intervene in foreign exchange markets if necessary to limit excessive franc appreciation and protect price stability.
Investors are now waiting for Switzerland’s June trade balance data, due later in the day, for additional clues on the country’s external position and possible market implications.
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