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On first 2024’s trading, the Swiss franc starts losing ground against the US dollar as the latter strengthened due to rising Treasury yields. This implies that bond traders might be indicating that they believe the inflation outlook will be more difficult than anticipated.
Higher US Treasury rates, which have increased by more than 2% as of this writing for bonds with maturities of 5, 10, and 30 years, are the primary cause of this weakness. Since higher interest rates draw in more foreign capital, the Dollar gains strength.
Negative pressure surrounding the Swiss Franc on Tuesday could be denting demand after BNP Paribas agreed to compensate mortgage holders to whom it sold Swiss Franc loans prior to the 2015 devaluation.
The bank was accused of mis-selling mortgages (it paid in Swiss Francs) which customers had to repay in Euros, after the Euro lost its peg against the Franc in 2015 and devalued massively, leaving them with outsized repayments.
The USD/CHF pair continues declining and has reached a new over-one-decade low. The Swiss Franc is considered a safe-haven asset due to the perceived status of Switzerland in the world: a stable economy, a strong export sector, big central bank reserves, or a longstanding political stance towards neutrality in global conflicts. Turbulent times are likely to strengthen CHF value against other currencies that are seen as riskier to invest in.
