Swiss Franc rallies on risk appetite while SNB threatens with FX intervention
The Swiss Franc (CHF) extended its recovery against the US Dollar (USD) on Tuesday, favoured by lower Oil prices amid hopes of a new round of US-Iran negotiations, which has prompted the Swiss National Bank (SNB) to launch an intervention warning. The USD/CHF pair has declined below 0.8200 during the European session, hitting session lows, nearly 1% below last week’s highs near 0.8270.
A higher appetite for risk is weighing on the safe-haven US Dollar on Tuesday, following news that Iran has proposed a plan to reopen the Strait of Hormuz within seven days after the US lifts its blockade on Iran’s ports, as reported by Kyodo News citing a senior Iranian government official.
This news has put additional pressure on Oil prices, pushing Brent Oil to its lowest levels in more than two weeks, at $94.20 earlier in the day, more than 10% below last week’s highs.
SNB launches an intervention threat
Against this background, the SNB warned on Tuesday that “the Middle East Conflict means that we remain prepared to intervene in the foreign market should the need arise.” The bank has not given further detail, but this move would be aimed at stemming a fast CHF appreciation, which would undermine its efforts to lift inflation.
The Swiss central bank meets on Thursday, and is widely expected to leave its benchmark interest rate at the current 0% level. SNB president Martin Schlegel observed earlier this month that inflationary pressures have increased somewhat recently, but that price pressures remain within the stability range, which practically dicar¡ds any monetary tightening, at least until well into 2027.
The US Dollar is witnessing a moderate weakness on Tuesday. The USD Index (DXY), which measures the value of the Greenback against a basket of six majors, has pulled back from nearly two-month highs at 100.67 but remains above the key 100.00 level so far.
Hopes that the meeting between US President Donald Trump and Iran's President Masoud Pezeshkian at the UN summit night will lead to a fresh round of peace talks have boosted risk appetite, encouraging investors to trim US Dollar longs and bet on riskier-considered assets. That said, the hawkish repricing of the Federal Reserve's (Fed) near-term monetary policy is keeping US Dollar downside limited so far.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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