Swiss Franc hits 13-month low as rising Oil prices boost Fed rate hike bets
USD/CHF climbs to its highest level since June 2025 on Thursday, supported by a broadly stronger US Dollar (USD) as the expanding war in the Middle East pushes Oil prices higher and strengthens Federal Reserve (Fed) rate hike expectations.
At the time of writing, the pair trades around 0.8170, extending gains for the fourth straight day. The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, trades around 101.45, its highest level in three weeks.
The war in the Middle East shows no sign of easing after the US and Iran resumed attacks earlier this month. Oil supply disruptions have now spread beyond the Strait of Hormuz to the Bab el-Mandeb Strait after Yemen’s Ansar Allah group attacked two Saudi Oil tankers in the Red Sea.
US President Donald Trump warned in a Truth Social post that “if they do this again, the US will hold Iran responsible,” describing Ansar Allah as a proxy of Tehran. He added that “major military punishment” would be inflicted on both Iran and the Yemeni rebel group.
Surging energy prices raise concerns that inflation could accelerate again, forcing the Fed to tighten monetary policy. According to the CME FedWatch Tool, markets now see an 83% chance of a rate hike in September, while the probability of an increase at next week’s meeting stands near 35%.
On the data front, US Initial Jobless Claims fell to 187K last week, well below market expectations of 212K. The previous week’s reading was revised slightly higher to 209K from 208K. Traders now await the preliminary S&P Global Purchasing Managers Index (PMI) data for July, due on Friday.
The Swiss Franc (CHF) typically attracts demand during periods of geopolitical stress. However, the currency is struggling to benefit from the Middle East war as widening US-Swiss interest-rate expectations and strong demand for the Greenback outweigh its traditional defensive appeal. Meanwhile, the Swiss National Bank (SNB) continues to signal its readiness to intervene against excessive Franc strength, adding pressure on the currency.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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