Insights 
VT 
The Swiss Franc weakens against the US Dollar, with USD/CHF trading around 0.7960, up nearly 0.43% as the US Dollar recovers from a one-month low near 0.7873. The Greenback strengthens amid easing US-China trade tensions, with the US Dollar Index hovering near 98.90, marking its third day of gains.
US President Trump has been optimistic about a trade deal at the upcoming APEC Summit in South Korea but later suggested the meeting might not happen. Markets remain focused on high-level trade talks in Malaysia, with crucial discussions between US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng.
Temporary Strength of US Dollar
The US Dollar’s strength may be temporary as economic uncertainties persist, impacted by Trump’s trade rhetoric and the ongoing US government shutdown. A 25-basis-point rate cut is expected at the upcoming Federal Reserve meeting, while Friday’s CPI data remains a potential influence.
In Switzerland, the trade surplus narrowed to CHF 10.2 billion in the third quarter from CHF 12.6 billion in the previous quarter. The US Dollar is widely used globally, trading over $6.6 trillion per day. It became the world’s reserve currency post-World War II, taking over from the British Pound.
The Federal Reserve’s monetary policy, featuring interest rate adjustments, influences the USD. Quantitative easing and tightening impact US Dollar strength, with QE typically weakening it, while QT often strengthens it.
As of today, October 21, 2025, the US Dollar has shown renewed strength against the Swiss Franc, with the USD/CHF pair trading around 0.9150. This is a stark contrast to the situation we saw back in late 2019 when the pair was struggling below the 0.8000 level amid different global pressures. The dynamics driving the market have changed, but the underlying uncertainties feel familiar.
Federal Reserve and Swiss National Bank Policies
The Federal Reserve is currently holding interest rates steady after the aggressive hiking cycle of 2022-2023 that brought inflation down from its peak above 9%. US inflation data from late 2024 settled around a more manageable 3.1%, but the market is now focused on when the Fed will begin to ease policy. We believe traders should be cautious about being overly bullish on the dollar, as futures markets are pricing in the possibility of rate cuts beginning in the first half of 2026.
On the other side, the Swiss National Bank is also in a holding pattern, but it faces different pressures related to the strength of the Franc and its impact on exports. Given that Swiss inflation has cooled more rapidly than in the US, the SNB has more room to cut interest rates sooner. Any signal of a more dovish stance from the SNB could weaken the Franc and push the USD/CHF pair higher.
Looking back at 2019, trade rhetoric created much of the market volatility, and while those specific tensions have evolved, we face new uncertainties today. Persistent friction in global supply chains and lingering geopolitical risks mean that the Swiss Franc’s safe-haven appeal can re-emerge without warning. A sudden flight to safety would quickly strengthen the Franc and pressure the USD/CHF pair downwards.
For derivative traders, this environment suggests that the longer-term path for USD/CHF may be upwards, driven by the potential for the SNB to cut rates before the Fed. We see value in buying medium-term call options that would profit from a rise in the pair, targeting a move towards 0.9400 by mid-2026. This strategy allows for participation in the upside while limiting the initial capital at risk.
In the immediate weeks ahead, however, the risk of a sudden market shock remains elevated, which could trigger a sharp drop in USD/CHF. To manage this risk, we are considering purchasing short-term put options with a strike price around 0.9000 as a hedge against any abrupt risk-off sentiment. This creates a balanced position that accounts for both the near-term volatility and the longer-term policy divergence we anticipate.
