USD/CHF snaps its winning streak as US Dollar declines, moves lower to near 0.8670

• USD/CHF pulls back as the US Dollar faces the challenge of lower US Treasury yields.
• US Dollar might have cheered the hawkish remarks from the Fed’s officials.
• The risk aversion sentiment contributed support to underpinning the Greenback.
• Swiss Franc experienced selling pressure on SNB Jordan’s concern over inflation.

USD/CHF snaps its winning streak that began on January 11, edging lower to near 0.8670 during the Asian session on Tuesday. The US Dollar (USD) faces the challenge of lower US Treasury yields. The 2-year and 10-year yields on US bond coupons stand at 4.38% and 4.09%, respectively, at the time of writing.

However, the Greenback received upward support following hawkish comments from US Federal Reserve (Fed) members. San Francisco Fed President Mary Daly expressed the view that the central bank still has significant work to do in achieving the goal of bringing inflation back down to the 2.0% target. Additionally, Atlanta Fed President Raphael Bostic emphasized his openness to adjusting his outlook on the timing of rate cuts, highlighting the Fed’s commitment to a data-dependent approach. These statements have contributed to a boost in support for the US Dollar.

The US Dollar Index (DXY) inches lower to near 103.20. The demand for the US Dollar is being driven by risk aversion sentiment, which is likely associated with the heightened geopolitical situation in the Middle East. Moreover, the US Conference Board Leading Economic Index improved to -0.1% in December from -0.5%, surpassing expectations for an improvement to -0.3%. Looking ahead, the Richmond Fed Manufacturing Index for January will be released later in the North American session, providing further insights into the state of the US economy.

The Swiss Franc (CHF) experienced selling pressure after Swiss National Bank (SNB) Chairman Thomas Jordan voiced concerns about the potential impact of the CHF’s strength on the SNB’s ability to keep inflation above zero in the Swiss domestic economy. Recent economic indicators have shown a slight increase in Swiss consumer prices in December and an improvement in consumer demand in November. These factors may influence the SNB’s decision-making in the upcoming meeting.

However, Swiss Producer and Import Prices (YoY) declined in December following the November decline. These more moderate figures could potentially dissuade the Swiss National Bank from adjusting its monetary policy. In the last policy update from the SNB in December, they expressed a commitment to adjusting monetary policy if needed to maintain inflation within the range consistent with price stability over the medium term.