The Swiss Franc traded near-flat against the US Dollar around 0.7870 in Asian trading on Friday. USD\/CHF consolidated as markets awaited confirmation of a longer peace deal between the US and Iran after claims of a \u201cfinal draft\u201d brokered by Pakistan.<\/p>\n
The US Dollar Index (DXY) was slightly higher at about 99.27. Risk appetite improved on Thursday after Iran\u2019s ILNA said a draft had been reached and a deal could be announced within hours.<\/p>\n
Reuters reported Iran was not prepared to give up its enriched uranium and wanted recognition of its authority over the Strait of Hormuz. US data showed the preliminary S&P Global Composite PMI for May was steady at 51.7, with stronger manufacturing offsetting slower services growth.<\/p>\n
In Switzerland, focus stayed on whether the Swiss National Bank may move away from a dovish stance as global inflation pressures rise alongside higher oil prices. The US Dollar is the most traded currency, making up over 88% of global FX turnover, or about $6.6 trillion a day in 2022.<\/p>\n
The Federal Reserve targets inflation at 2% and adjusts interest rates to manage inflation and employment. It can also use quantitative easing, which tends to weaken the Dollar, or quantitative tightening, which tends to support it.<\/p>\n
Looking back, we remember this time last year, in May 2025, when the USD\/CHF pair was trading flat around 0.7870. There was a lot of focus on a potential peace deal between the US and Iran, which created a sense of temporary calm in the markets. At that time, the US Dollar Index was holding steady just below 100.<\/p>\n
That broad peace deal never fully stabilized, and continued tensions in the Strait of Hormuz have kept energy prices unpredictable. The failure to secure a lasting agreement has meant that geopolitical risk remains a significant factor influencing currency markets. We see this reflected in oil prices, which have averaged over $85 a barrel for the Brent crude benchmark so far in 2026.<\/p>\n
As a result, the USD\/CHF is now trading significantly higher, near 0.9150, reflecting a much stronger dollar. This strength is supported by persistent US inflation, which the latest CPI data shows is still hovering at 2.8%, well above the Federal Reserve’s target. This makes the Fed hesitant to lower interest rates from their current levels.<\/p>\n
Meanwhile, the Swiss National Bank (SNB) did follow through on the speculation from 2025 and exited its dovish policy to fight inflation. However, with Swiss inflation now having fallen to 1.4%, the SNB is signaling it may be one of the first major central banks to begin cutting rates. This growing policy divergence between a cautious Fed and a dovish-leaning SNB is a primary driver of the franc’s weakness against the dollar.<\/p>\n
For derivative traders, this environment suggests betting on continued dollar strength against the franc. The clear policy difference supports strategies like buying USD\/CHF call options with strike prices around 0.9200 or 0.9250 for the coming months. This allows traders to profit from a continued upward move in the pair.<\/p>\n
Given the elevated uncertainty, implied volatility in the pair has risen, making options more expensive. Therefore, using spreads, such as a bull call spread, could be a more cost-effective strategy for traders. This approach would involve buying a call option and simultaneously selling another call option at a higher strike price to reduce the initial premium paid.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" USD\/CHF held near 0.7870 as investors awaited US-Iran peace confirmation; SNB and Fed policy remained key.<\/p>\n","protected":false},"author":87,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[71],"tags":[],"class_list":["post-47327","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\n\t\t