Economy Forex News

USD/CHF falls to five-week lows amid risk aversion

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  • USD/CHF failed to build on its modest intraday rally to levels just above 0.9200.
  • Risk aversion momentum in markets benefited the safe-haven CHF and exerted some pressure.
  • Rising US bond yields revived demand for the dollar and helped limit the pair’s losses.

USD/CHF retreated more than 25 pips from the European session highs and fell to the lowest level since mid-September around the 0.9180 area in the last hour.

USD/CHF

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The pair struggled to hold on to its modest intraday gains

The pair struggled to hold on to its modest intraday gains at levels just above the 0.9200 mark and has now slipped into negative territory for the third day in a row. Risk-on sentiment in the markets benefited the safe-haven Swiss franc, which, in turn, drove further USD/CHF selling on Thursday.

A $2.6 billion stake in Evergrande’s real estate services unit has fallen through. Raising concerns about possible contagion from Evergrande’s debt crisis in China. In turn, that dampened investor appetite for riskier assets, which drove flows into traditional safe-haven currencies, including the CHF.

Meanwhile, the modest pickup in U.S. dollar demand didn’t affect the intraday pullback, which high U.S. Treasury yield supported. As a result, the yield on the benchmark 10-year U.S. government bond remained near 1.67%, the highest level since May, amid expectations of a Federal Reserve policy tightening soon.

The recent macroeconomic releases in the US (industrial production and housing market data) indicate that economic activity has weakened. However, investors seem to believe that higher inflation than expected could force the Fed to adopt a more aggressive policy response. And additionally are pricing in the possibility of a rate hike in 2022.

Therefore, before placing further bearish bets or positioning for an extension of the recent bearish leg seen over the past three weeks, it is prudent to wait for strong follow-through selling. The release of the Philly Fed manufacturing index and the usual weekly jobless claims followed the latter.

Dollar price dynamics could therefore fluctuate, along with Fed Governor Christopher Waller’s speech and U.S. bond yields. Traders will use the signals from the overall market risk sentiment to take advantage of some short-term opportunities around USD/CHF.

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Michelle D. Madsen

Michelle D. Madsen graduated from the University of Westminster and has been deeply involved in the world of finance ever since. She has worked as a Broadcast Journalist hosting various news shows and informative webcasts about the financial markets. Since 2004 she has also been writing for Metanews daily, her attention to detail, and her in-depth knowledge of the financial markets have led her to cover Foreign Exchange and commodities. The world of finance has changed in the last few years with the introduction and rising popularity of cryptocurrencies. She has in no means been left behind, adding this to her bank of intellect and is now also an expert in cryptocurrencies. For the last ten years, Ms. Madsen has been engaged in the financial market. She has notedly written a great number of incredibly informative reviews for the crypto exchange and forex brokers. Her wealth of knowledge has enabled her to become a leading expert in the field. She continues to inform the public writing up-to-date, thorough reviews for the readers of Metanews as she has for the last decade.
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