"Sell America"Strengthens, Swiss Franc Strengthens, Pressures Dollar
USD/CHF was "slumping" in the market on Tuesday (January 27th). The US dollar weakened broadly, immediately triggering a surge in the flow of funds into the Swiss franc. The pair fell more than 1% and briefly hovered around 0.7666—its lowest level since 2011, indicating renewed USD selling pressure.
The Swiss franc took center stage due to its safe-haven status. As markets began to question the "safety" of dollar assets, the CHF became a more defensive destination. The "sell America" narrative strengthened: Trump's aggressive trade agenda, repeated tariff threats, and concerns about political interference in the Fed's independence made confidence in US policy appear shaky.
In the headlines, Trump again heated up the trade war by announcing plans to raise tariffs on South Korean imports to higher than the current rates. Trump accused the South Korean parliament of not ratifying last year's trade deal and suggested sectors such as automotive, lumber, and pharmaceuticals could be affected. The market interpreted this as an additional risk, pressuring the dollar.
Pressure on the dollar intensified due to rumors of a potential coordinated US-Japan foreign exchange intervention to support the yen. While there has been no official confirmation, such rumors are usually enough to trigger a mass unwinding of long dollar positions—traders are reluctant to hold large amounts of USD ahead of a risk event.
This was reflected in the DXY, which fell to its weakest level since early 2022. When the dollar weakened against many currencies, the CHF, whose "daily staple" is risk-off, immediately followed suit.
The excessive strengthening of the franc also made the market turn to the SNB. An excessively strong CHF could put pressure on the Swiss economy, which relies heavily on exports, and could drag already low inflation even lower. Therefore, the market is starting to reassess the risks of the SNB's response—from intervention to looser policy discourse.
Next, the focus remains on the Fed. The market widely expects interest rates to be on hold, but the most anticipated is Powell's tone: whether he remains hawkish or signals a more dovish tone. Even the slightest change in tone could trigger further waves in the dollar. Tomorrow, the Swiss ZEW (expectations) release will also add some color to the direction of the CHF.
Source: Newsmaker.id
