In Friday Asian trade, USD/CHF fell for a third straight session to about 0.8220
as reduced safe-haven demand amid optimism over US-led diplomatic efforts
weighed on the dollar. Downside may be capped by persistent franc weakness: a
widening US–Swiss rate differential and Switzerland’s very low borrowing costs
keep the franc an attractive funding currency, fuelling carry/arbitrage trades
that sell CHF to buy higher-yielding assets. Swiss policymakers have also scaled
back warnings of direct FX intervention, removing a potential support.
Scotiabank strategists say the dollar’s risk profile has shifted materially and,
given weakening fundamentals, see significant downside risk to the currency.
