The USD/CHF pair continued to decline, trading around 0.8640 during the Asian session on Monday, as the US Dollar (USD) weakened following dovish remarks from Federal Reserve officials. These comments have fueled speculation of a potential interest rate cut by the central bank in September, further pressuring the USD/CHF exchange rate.
Mary Daly, President of the Federal Reserve Bank of San Francisco, stated on Sunday that the central bank should take a cautious approach to reducing borrowing costs, as reported by the Financial Times. Similarly, Austan Goolsbee, President of the Federal Reserve Bank of Chicago, cautioned against maintaining a restrictive monetary policy longer than necessary.
The US Dollar Index (DXY), which tracks the USD against six major currencies, extended its losses for a second consecutive day, hovering around 102.10. A decline in US Treasury yields also contributed to the dollar’s downward momentum, with 2-year and 10-year yields currently at 4.05% and 3.88%, respectively.
On the Swiss Franc (CHF) front, safe-haven flows amid escalating geopolitical tensions have likely supported the currency. Hamas issued a statement rejecting the terms of a hostage release-ceasefire deal discussed in Doha last week, according to a Reuters report citing the Times of Israel. Additionally, concerns about the conflict between Ukraine and Russia have intensified, with Ukraine launching its largest military operation against Russia since World War II.
Adding to the Swiss Franc’s strength, Switzerland’s industrial production surged by 7.3% year-on-year in the second quarter, rebounding sharply from a 2% decline in the previous quarter. This marks the fastest expansion in Swiss industrial production since Q1 2022. Traders are now looking ahead to the release of Switzerland’s trade balance data on Tuesday.
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