The USD/CHF rate fell more than 0.75% on Monday as the market reflects on the weaker US dollar. The pair fell to 0.9133, the lowest level since March 1.
Swiss franc gains momentum:
The Swiss franc gained momentum against the US dollar as government bond yields continued to fall. The 10-year bond yield fell to 1.56%, below the previous high of 1.76%. The 30-year yield fell to 2.26%, which is a sign that investors assume the US Federal Reserve won’t hike rates anytime soon.
In addition to the Swiss franc, the US dollar fell more than 0.50% against most currencies such as the euro, pound sterling, and Japanese yen. However, the Swiss Franc generally remained unchanged against other currencies such as the Pound Sterling and the Euro.
The USD/CHF exchange rate has recently been in a steep sell-off, even after the diverging economic figures from the USA and Switzerland. In the US, the unemployment rate fell to 6.0% in March while the economy created more than 900,000 jobs. As the country intensifies its vaccination campaign, this trend is likely to continue.
Besides, the US is considering implementing a major infrastructure project worth more than 2 trillion. could cost $. This will be the largest expenditure ever recorded. Analysts expect some Republicans will back the spending to improve the country’s key infrastructure projects like roads and bridges.
Last week, data from the US showed that consumer prices and retail sales rose over the past month. The industrial and manufacturing sector has also developed well.
While these numbers should be positive for USD / CHF, the US Federal Reserve’s hesitation on rates has resulted in a weaker dollar. The US Federal Reserve has insisted that rates stay at current levels for a few more years.
The USD/CHF failed to capitalize on its early uptick, instead met with some fresh supply near the 0.9215 regions and prolonged its recent retracement slide from nine-month tops touched on April 1. The bearish pressure surrounding the US dollar remained unabated on the first day of a new trading week. This, in turn, was seen as a key factor exerting pressure on the USD/CHF pair.
Despite the incoming strong US economic data, investors seem convinced that the Fed will keep interest rates near zero levels for a longer period. The Fed’s stubbornly dovish view that a spike in inflation is likely to be transitory forced investors to cut the bets for an earlier than anticipated Fed lift-off, which, in turn, continued undermining demand for the greenback.
The buck was further weighed down by the recent sharp decline in the US Treasury bond yields. In fact, the yield on the benchmark 10-year US government bond extended its recent sharp pullback from a 14-month peak of 1.776% touched in March and tumbled to 1.5280% last week. This was seen as another factor that further contributed to driving flows away from the USD.
Meanwhile, a slight deterioration in the global risk sentiment benefitted the safe-haven Swiss franc and exerted some additional downward pressure on the USD/CHF pair. Investors turned cautious amid renewed fears about another dangerous wave of coronavirus infections globally.
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