USD/CHF extended gains for a fourth day and traded near 0.7870 in Asian hours on Friday, rising towards 0.7900. The US Dollar firmed on safe-haven demand amid uncertainty linked to the US–Iran conflict.
Lebanon is set to seek a one-month extension to the current ceasefire with Israel during a second round of direct talks in Washington. Israel’s UN Ambassador Danny Danon said the extension is “not 100%”.
Safe Haven Demand Lifts Dollar
The US military intercepted two Iranian oil supertankers accused of trying to evade a blockade, while Iran has threatened vessels in the Strait of Hormuz. US officials are preparing contingency plans to target Iran’s Strait capabilities if the ceasefire ends.
US Weekly Initial Jobless Claims rose to 215K from 212K. S&P Global PMI readings rose above expectations, with Manufacturing at 54.0 and Services at 51.3.
In Switzerland, the trade surplus narrowed to CHF 2.7 billion in March from a revised CHF 4.4 billion in February. Imports rose 10.1% month on month to CHF 19.6 billion, while exports increased 1% to CHF 22.4 billion.
Looking back at the analysis from over a year ago, we can see how the drivers for USD/CHF have fundamentally changed. The pair has since climbed significantly from the 0.7900 level and now trades around 0.9150. The acute risk aversion that was driven by the US-Iran conflict in 2025 has largely dissipated.
Shift Toward Policy Divergence
The intense focus on the Strait of Hormuz has subsided following de-escalation agreements in late 2025. This has removed the primary safe-haven bid that was supporting both the US Dollar and the Swiss Franc at the time. We see that the market’s attention has now shifted away from geopolitical flare-ups toward central bank policy divergence.
While US economic data was strong back then, we now see a more mixed but stable picture. Recent data shows weekly jobless claims holding steady around 210,000, but the latest ISM Manufacturing PMI has dipped to 49.8, indicating a slight contraction. However, the services sector remains a key pillar of strength, with the Services PMI posting a robust 53.5.
The speculation in 2025 of a more hawkish Swiss National Bank (SNB) has proven to be incorrect. With Swiss inflation having fallen to just 1.2% in the latest reading, the SNB became one of the first major central banks to begin an easing cycle, cutting its key policy rate to 1.50% last month. This stands in stark contrast to the US Federal Reserve, which is holding its policy rate steady.
This policy divergence creates a significant interest rate differential favouring the US Dollar, providing a strong tailwind for the USD/CHF pair. Derivative traders should consider selling out-of-the-money USD/CHF puts or implementing bull put spreads. This strategy takes advantage of the carry trade and the floor that the interest rate gap provides for the pair.
Implied volatility has also compressed significantly since the highs seen during the geopolitical tensions of 2025. This lower volatility environment makes it less expensive to construct longer-term bullish positions using call options. We believe traders can look at buying call options dated three to six months out to position for a continued, albeit slower, grind higher.
