Swiss Franc Strengthens; US Dollar Pressured by Treasury Buyback Policy

The Swiss franc strengthened against the US dollar during Monday's trading (August 24), pushing the USD/CHF pair down toward the 0.8000 level following a two-day rally. Pressure on the dollar mounted after the US government announced new fiscal measures aimed at curbing the rise in Treasury bond yields.

The US Treasury Department surprised markets with a plan to double its buybacks of long-term government bonds. Treasury Secretary Scott Bessent also signaled the possibility of buyback volumes exceeding US$4 billion, an effort to demonstrate that current high yields do not fully reflect underlying economic fundamentals.

This move helped suppress yields and dampened the dollar's appeal. ING analysts believe that government support for the Treasury market could keep volatility low and sustain interest in carry trade strategies, particularly while global funding conditions remain relatively stable.

However, the dollar's decline could be tempered by rising demand for safe-haven assets driven by geopolitical tensions in the Middle East. Iran has condemned planned new US sanctions, while security officials in Tehran have warned of potential major retaliation should Washington escalate pressure.

Meanwhile, the Swiss National Bank maintained interest rates at 0% and reiterated its readiness to intervene should the franc appreciate too sharply. As long as the dollar remains under pressure from falling yields, USD/CHF is likely to remain at lower levels, though its future trajectory will also be influenced by geopolitical developments and expectations regarding SNB policy. (asd)

Source: Newsmaker.id