The Swiss Franc (CHF) slipped against the US Dollar (USD) on Monday, with the USD/CHF currency pair climbing to fresh highs not seen since June 2025. This move followed a Bloomberg report suggesting that the Swiss National Bank (SNB) could maintain its policy rate at zero until the end of 2027, based on current inflation forecasts and assuming no major new shocks. The SNB declined to comment on this report, according to Reuters [1]. At the time of writing, USD/CHF trades around 0.8187, marking its sixth consecutive day of gains [1].
Swiss inflation remains subdued and well within the SNB’s 0%-2% price-stability range, despite elevated oil prices since the onset of the US-Iran war. The inflationary impact in Switzerland has been more contained compared to the United States [1]. The divergence in monetary policy expectations is a key driver, with traders anticipating the SNB will keep rates at zero, while the Federal Reserve (Fed) is expected to raise interest rates later this year to address US inflation [1].
The Fed is set to announce its monetary policy decision on Wednesday and is widely expected to keep rates unchanged at 3.50%-3.75%. However, traders are pricing in a 33% chance of an immediate hike and an 81% probability of a rate increase in September, according to the CME FedWatch Tool [1]. This wide interest-rate gap favors the US Dollar, which has also become the preferred safe-haven currency during the US-Iran war, while the SNB’s willingness to curb excessive Swiss Franc strength limits demand for the CHF [1].
Earlier in the day, a temporary pause in US-Iran attacks briefly weighed on the US Dollar, but optimism faded as the likelihood of a peace agreement diminished. The US Dollar Index (DXY) recovered from an intraday low of 101.12 to trade around 101.47 [1].
CONCLUSION
The Swiss Franc's decline against the US Dollar is driven by diverging monetary policy expectations, with the SNB likely to keep rates at zero while the Fed is expected to hike later this year. This interest-rate gap and safe-haven flows into the USD are supporting the Greenback. Market participants will closely watch the upcoming Fed decision for further direction.