The USD/CHF pair shows a decline for the fourth consecutive day, dropping to a two-week low near the 0.7900 mark, as a weak US Dollar persists. The US Dollar Index faces pressure from anticipated Federal Reserve rate cuts and the prolonged US government shutdown, with full pricing of two more interest rate cuts expected in October and December.

Mounting US-China trade tensions and geopolitical risks support the CHF as a safe haven. Concerns rise as US President Trump threatens higher tariffs on Chinese goods and China restricts rare earth exports, with both countries imposing tit-for-tat port fees. These factors impact equity markets, benefiting the CHF and pushing the USD/CHF downward from the recent 0.8075 peak.

US Dollar’s Position Against Major Currencies

The table shows the US Dollar losing ground against major currencies, with declines of 0.79% against the Euro and a notable drop of 1.37% against the Swiss Franc. The Dollar gains only against the Japanese Yen by 0.33%. The heat map reflects these changes, with the Swiss Franc gaining strength broadly. The data suggest market reactions to geopolitical and economic uncertainties, driving shifts in currency performance this week.

Looking back, the sentiment described here feels like a distant memory, as we remember when USD/CHF was flirting with 0.7900. Today, the pair is trading much higher, recently pushing past the 0.9150 level due to fundamentally different market conditions. The sustained selling of the US dollar that we saw in the past has completely reversed course over the last year.

The primary driver for this shift has been central bank policy divergence, a theme we’ve watched unfold since early 2024. The Swiss National Bank was one of the first major central banks to begin its easing cycle, cutting its policy rate to 1.00% to combat low inflation, which Swiss data from September 2025 confirmed is holding steady at just 1.5% year-over-year. This has made holding the Swiss Franc less attractive for yield-seeking investors.

In stark contrast, the US Federal Reserve has maintained its restrictive stance, keeping the Fed Funds Rate elevated in the 5.25%-5.50% range. Recent US Consumer Price Index (CPI) data for September 2025 showed inflation remains sticky at 3.4%, well above the Fed’s 2% target, reinforcing the “higher for longer” narrative. This interest rate differential is providing significant upward momentum for the US dollar against the franc.

Strategic Trade Positioning

For derivative traders, this clear, policy-driven trend suggests positioning for further USD/CHF strength. Buying call options with strike prices at 0.9250 and 0.9300 for the coming months appears to be a direct way to capitalize on the expected continuation of this move. This strategy offers defined risk while maintaining exposure to significant upside if the interest rate gap continues to influence currency flows.

However, we should also consider protective strategies given the potential for sharp, unforeseen market shifts. Purchasing out-of-the-money put options, perhaps with a strike near 0.9000, can serve as a cost-effective hedge against a sudden reversal. This provides a safety net if geopolitical tensions escalate unexpectedly, which historically drives flight-to-safety flows into the Swiss Franc.

It is also wise to monitor implied volatility around upcoming central bank meetings for both the Fed and the SNB. Trading volatility itself through straddles could be profitable, as any surprise in policy statements is likely to cause a significant price move, regardless of the direction. These events are key checkpoints for our current bullish thesis on the pair.

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