The United States dollar continues to rally against the Swiss franc, as the interest rate differential continues to see carry traders coming into the forex markets. As long as the Swiss National Bank is fine with a weak franc, this will be a plausible trend.
USD/CHF
The U.S. dollar is positive against the Swiss franc during early trading here on Monday, as we are well above the 0.83 level. At this point, the market continues to favor the U.S. dollar over the franc, which is not a huge surprise. We have seen interest rates rise slightly in America, and the interest rate differential continues to be huge. That huge interest rate differential means that you get paid at the end of every day to hold the dollar against the franc.
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Swiss franc is still a funding currency for the carry trade.
Quite frankly, the Swiss franc is the carry trade funding currency du jour, as the Bank of Japan has recently intervened. In that environment, it just means that it is, for lack of a better word, safer to go against the franc. The Swiss National Bank has no interest whatsoever in trying to fight franc depreciation and is one of the most dovish central banks out there, so it all lines up quite nicely. This could be a longer-term trend given enough time.
Interest rate expectations, as far as hikes are concerned, have come down in the United States for this month. Next month is still somewhat elevated, and we are still looking at the idea that interest rate hikes come in December.
Short-term pullbacks continue to be buying opportunities from everything I see here, and I do like shorting the Swiss franc against almost anything, but especially the U.S. dollar, which is getting so much in the way of attention these days.
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