The Swiss Franc (CHF) continued to struggle against the US Dollar (USD), with the USD/CHF pair extending its gains for the third consecutive day and trading around 0.7880 during Asian hours on Wednesday [1]. This movement was primarily driven by persistent safe-haven demand for the US Dollar, fueled by stalled US-Iran peace negotiations and renewed tensions in the Middle East [1]. US Central Command (CENTCOM) reported on Tuesday that it had successfully countered a series of Iranian missile and drone strikes targeting Kuwait and Bahrain, and in response, US forces conducted self-defense strikes against military targets on Iran’s Qeshm Island [1].
The potential closure of the Strait of Hormuz was highlighted as a risk that could drive energy prices higher and intensify global inflationary pressures, reinforcing expectations that the Federal Reserve (Fed) will keep interest rates elevated for an extended period [1]. This macroeconomic backdrop has supported the US Dollar’s strength relative to the Swiss Franc.
On the Swiss economic front, Switzerland’s trade surplus rebounded to CHF 3.2 billion in April from a revised two-year low of CHF 2.6 billion in March. This improvement was attributed to a 3.0% month-over-month decline in imports (to CHF 19.0 billion) and a slight 0.1% increase in exports, which reached a three-month high of CHF 22.3 billion [1].
Swiss National Bank (SNB) Chairman Martin Schlegel commented on Tuesday that the real overvaluation of the Swiss Franc is significantly lower than its nominal overvaluation. Schlegel also stated that the SNB has increased its readiness to intervene in the foreign exchange market to counter overvaluation pressures, particularly those arising from the escalating conflict in the Middle East [1].
CONCLUSION
The Swiss Franc has weakened against the US Dollar amid heightened geopolitical tensions and robust US safe-haven demand. While Switzerland’s trade surplus has improved, the SNB remains vigilant and prepared to intervene if overvaluation pressures persist. Market sentiment currently favors the US Dollar, with expectations for sustained higher US interest rates.