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USD/CHF climbs to one-week high, further beyond mid-0.9200s amid stronger USD

  • USD/CHF shot to a one-week high on Tuesday amid a goodish pickup in the USD demand.
  • Expectations for a 50 bps rate hike in March, rising US bond yields underpinned the USD.
  • The cautious market mood could benefit the safe-haven CHF and cap gains for the major.

The USD/CHF pair built on its steady intraday ascent and climbed to a one-week high, further beyond mid-0.9200s during the early European session.

Following the overnight modest downtick, the USD/CHF pair regained positive traction on Tuesday and is now looking to build on last week's solid bounce from the 0.9175 region. The momentum was sponsored by a goodish pickup in demand for the US dollar, which drew some support from a fresh leg up in the US Treasury bond yields. That said, the prevalent cautious market mood could underpin the safe-haven Swiss franc and act as a headwind for the pair.

The markets have been speculating that the Fed will adopt a more aggressive policy response to combat rising inflation and priced in the possibility of a 50 bps rate hike in March. This, in turn, pushed the yield on the benchmark 10-year US government bond closer to the 2.0% threshold. Adding to this, the yield on the 2-year and 5-year notes rose to the highest level since February 2020 and July 2019, respectively, and benefitted the greenback.

It, however, remains to be seen if bulls are able to capitalize on the move or prefer to move on the sidelines ahead of Thursday's release of the latest US consumer inflation figures. The US CPI report would determine the Fed's policy outlook and provide a fresh directional impetus to the USD/CHF pair. Hence, it will be prudent to wait for a strong follow-through buying before traders start positioning for an extension of a one-week-old uptrend.

Heading into the data risks, the US bond yields will continue to play a key role in influencing the USD price dynamics. This, along with the broader market risk sentiment, would be looked upon for some short-term trading opportunities around the USD/CHF pair.

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