USDCHF USD/CHF

The Swiss Franc, or just “Swiss” as traders usually call it, when paired up with the US Dollar is referred to as one of the majors, which are the most demanded currencies in the foreign exchange market and trading. The CHF is included in the U.S. Dollar index with a share of 3.6%. It is globally considered to be one of the safe haven assets, or a currency of the last resort. The USD/CHF has specific features:
- The leading part in the pair belongs to the U.S. Dollar because it affects it much stronger than the Swiss Franc. Thus, dollar-related drivers should be monitored very carefully, including U.S. macroeconomic data on GDP, inflation, important political issues, and the actions of the Federal Reserve;
- The demand for the Swiss Franc rises amid uncertainty and economic turmoil. This is largely attributed to the history of Switzerland itself, as it has kept its neutral status for centuries. The country consistently rejects any membership or even the notion of being associated with military or political treaties, like North Atlantic Treaty Organisation (NATO). It has rejected the option to join the European Union and as a stand-alone economy it has a very strong financial market, and a prominent strong banking sector that is famous worldwide for the ultra-protected status that its clients enjoy. The country has low inflation (the lowest in Europe) which makes the Swiss Franc very attractive when inflation is raging in the rest of the world;
- Rising fears and lower risk appetite favours the Swiss Franc. The CBOE Volatility Index (VIX) may serve as an indication of the demand for the currency. When VIX is goes up to the elevated fear zone, the USD/CHF is prone to go down. When risks are low, USD/CHF is likely to rise;
- Switzerland is an exporting country. It exports famous watches, jewelry, chocolate, cheese, knifes, and more. The country has been enjoying a positive trade balance for centuries. So, Swiss National Bank (SNB) doesn’t really like the strengthening of the Swiss Franc, as the country may receive more for its exports when the currency is weaker, and its products become less expensive compared to similar products sold by other nations. Thus, SNB is trying to keep its interest rates lower than in other developed nations;
- The Swiss economy is heavily integrated into the European economy. Half of its exports goes to the EU. So, the Swiss Franc is largely affected by other European currencies, especially the Euro. Large moves of the Euro will affect the Swiss Franc. The USD/CHF has a negative correlation to EUR/USD. The rise of the latter generally means the decline of the USD/CHF.