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USD/CHF holds near 0.801 as SNB keeps negative rates possible
The Swiss franc faces pressure after SNB board member Petra Tschudin said rates could be cut further below zero if needed to keep inflation within the 0% to 2% medium term range.
USD/CHF held steady on Friday as the US dollar pared intraday losses, with the pair trading around 0.8013 after slipping to 0.7949 the prior day, its lowest level since June 17. Even with the modest rebound, the exchange rate was still set to end the week in negative territory.
Sentiment toward the Swiss franc weakened after comments from Swiss National Bank Governing Board member Petra Tschudin. In an interview published by Finanz und Wirtschaft, she said that if it became necessary to lower rates below zero to keep inflation between 0% and 2% in the medium term, the SNB would do so, and she linked CHF softness to higher interest rate expectations abroad.
The US dollar index, which tracks the greenback against six major currencies, was around 98.81 after recovering from an intraday low of 98.56, with the index near a three month low and on track for a weekly decline of nearly 0.80%. Data also supported the dollar backdrop unevenly, with August S&P Global composite PMI rising to a 52 month high of 56.0 and services PMI reaching a 20 month high of 56.8, while manufacturing PMI eased to a five month low of 53.2.
Fading expectations for a Federal Reserve rate hike further weighed on the dollar, with CME FedWatch showing about a 65% probability the central bank will keep rates unchanged next month after softer US employment and inflation data for July. Attention is now on next week’s US PCE inflation release, with the SNB comments and US policy expectations driving the near term USD/CHF setup, according to FXStreet.
Latest closeDollar index 99.64 ▼0.3%