USD/CHF Corrects, but Dollar Remains Supported by Fed's Hawkish Stance

USD/CHF halted a three-day winning streak and edged down to around 0.8330 during Thursday's Asian session. Despite this correction, the pair's downside potential remains relatively limited, as the US Dollar continues to draw support from the Federal Reserve's hawkish stance and elevated Treasury yields.

Minutes from the September FOMC meeting revealed that all 19 policymakers supported a rate hike that month, with the majority assessing that further increases might be necessary before year-end. While markets largely anticipate the Fed will hold rates steady in October, the probability of a hike in December remains around 78.3%.

The Dollar is also bolstered by a rebound in US Treasury yields. The 10-year yield stands at approximately 5.31%, while the 30-year yield has reached around 5.70%—levels nearing highs not seen since 2002. High yields keep dollar-denominated assets attractive and help limit the decline in USD/CHF.

On the Swiss side, the Franc faces pressure from the prospect of a relatively looser Swiss National Bank (SNB) policy. Economists generally expect the SNB to maintain its policy rate at 0%, although money markets have begun pricing in the possibility of rate hikes next year.

Swiss inflation did rise to 1.0% in September—driven largely by energy costs—but remains within the SNB's price stability range. Consequently, the central bank faces no immediate, significant pressure to tighten policy.

Newsmaker Analysis: The current USD/CHF correction does not yet signal a strong trend reversal. Fundamentals continue to favor the Dollar, driven by the Fed's hawkish stance, high Treasury yields, and a strong likelihood of a December rate hike. Market attention now shifts to comments from Fed officials such as Christopher Waller and Alberto Musalem for further clues regarding the trajectory of US interest rates. (asd)

Source: Newsmaker.id