27 Mar 2025

USD/CHF rises as the US Dollar gains traction amid increased market caution in anticipation of President Trump's tariff announcement scheduled for April 2. The Greenback is supported by a rise in US Treasury yields, with the 2-year and 10-year bond yields reaching 4.01% and 4.33%, respectively.

The Swiss Franc has strengthened in response to escalating geopolitical tensions in the Middle East. After experiencing two consecutive days of declines, the USD/CHF pair rebounds, trading around 0.8840 during the Asian session on Wednesday. The US Dollar finds support as market participants remain cautious ahead of the impending tariff announcement.

The US Dollar Index (DXY), which gauges the USD against six major currencies, has recovered from its recent downturn and is currently around 104.30. The Greenback's momentum is bolstered by rising US Treasury yields, with the 2-year and 10-year bond yields at 4.01% and 4.33%, respectively, at the time of this report.

Hawkish comments from Federal Reserve Governor Adriana Kugler further strengthen the USD. On Tuesday, Kugler emphasized that the Fed's monetary policy remains appropriately restrictive. She also pointed out that progress towards the 2% inflation target has decelerated since last summer, noting that the recent increase in goods inflation is "unhelpful."

The Swiss National Bank (SNB) reported on Monday that Switzerland's current account surplus decreased to CHF 9.8 billion in the fourth quarter of 2024, down from CHF 13.8 billion in the same quarter the previous year. Additionally, the services account deficit widened to CHF 9.4 billion from CHF 8.7 billion, while the goods account surplus increased to CHF 30 billion from CHF 27.9 billion a year earlier.

Moreover, the ongoing geopolitical tensions in the Middle East may heighten demand for the Swiss Franc (CHF) as a safe haven. Israel has resumed airstrikes in Gaza following a nearly two-month ceasefire with Hamas, with Prime Minister Benjamin Netanyahu pledging to intensify military operations to secure the release of hostages and dismantle Hamas.