USD/CHF broke below its two-year range between 0.84 and 0.92 this month. USD/CHF hit a decade-low of 0.8040 on April 21 before recovering to 0.83 in the past two sessions. Before attempting to predict if USD/CHF has bottomed, it will be useful to revisit the previous episodes when USD/CHF hit even lower levels in 2011 and 2015 to provide a better understanding of the CHF’s strength and how the Swiss National Bank responded in each case. 



In the first episode, USD/CHF bottomed at 0.7071 in August 2011. SNB targeted EUR/CHF, which was falling towards 1.00 in August 2011, from investors seeking safety during the Eurozone sovereign debt crisis. In August 2011, markets heeded the SNB’s warning that the CHF was “massively overvalued” after it lowered interest rates to near 0% and expanded liquidity operations. In September 2011, the SNB declared it would “no longer tolerate” a EUR/CHF rate below 1.210 and was prepared to buy unlimited foreign currency to enforce this minimum rate. USD/CHF rose over the next year to a high of 0.9970 in July 2012. 

In the second episode, USD/CHF bottomed at 0.7406 in January 2015. On January 15, 2015, the SNB made a shock announcement to abandon the EUR/CHF peg at 1.20. EUR/CHF crashed to 0.85, pummelling USD/CHF to 0.74 that day. The SNB was pre-empting the European Central Bank, which unveiled an expanded asset purchase programme a week later, which heralded the formal start of QE operations in March 2015. However, the SNB’s shock announcement damaged its credibility, forcing an immediate response to cut interest rates further into negative territory, from -0.25% to -0.75%, to counter the CHF’s excessive appreciation. USD/CHF recovered to 1.00 in mid-March 2015 before holding a 0.94-1.03 range from 2016 to 2017. 

What were the insights from these two episodes? The CHF’s strength stemmed from its haven status to Eurozone risks. The prevailing USD strength in past episodes became part of the solution when the SNB cut interest rates and intervened in the forex market to counter the CHF’s appreciation. 

Similar factors were also in place when the SNB countered the CHF’s haven status during the Trump Trade in late 2024. Shortly after assuming office in October 2024, SNB Chairman Martin Schlegel warned in November 2024 that the central bank could counter the CHF’s haven status through negative interest rates if needed and FX interventions. EUR/CHF had depreciated to 0.93 on a stronger USD on Trump’s victory in the November 2024 US elections.  In December 2024, SNB slashed interest rates by 50 bps to 0.50% amid USD strength, which lifted USD/CHF to near 0.92 in January 2024 from its 0.84 low in September 2024.

Unfortunately, the landscape has become less conducive to countering the CHF’s strength in 2025. The USD’s “Trump Trade” rally faltered after Trump’s inauguration on January 20.  The SNB’s 25 bps rate cut to 0.25% on March 20 briefly supported USD/CHF around 0.88 but was overshadowed by Trump’s erratic and unpredictable tariff policy. However, Trump’s challenge to the Fed’s independence undermined one of the sacred institutional pillars supporting the USD’s hegemony and its haven role. The subsequent elevation in the CHF’s haven status drove USD/CHF to a decade-low of 0.8040 on April 21. 

Given Trump’s history of policy reversals, it is premature to conclude that USD/CHF’s rebound to 0.83 over the past two sessions is sustainable. There is no assurance that Trump will refrain from threatening Powell again as he seeks lower borrowing costs to support his administration’s push for extending his 2017 tax cuts by Independence Day. With the IMF’s latest 2025 growth forecast for the US economy aligning closely with the Fed’s projection, Powell will likely maintain the Fed’s extended rate pause stance on inflation risks driven by Trump’s tariffs. However, if advance GDP growth for 1Q25 turns negative – as projected by the Atlanta Fed GDPNow model – Trump will likely attack Powell again. Caution is also warranted regarding the Trump administration’s offer to reduce tariffs on Chinese imports. Any meaningful de-escalation would require Trump and China President Xi Jinping to resume direct engagement to lay the groundwork for trade negotiations first. 

Without EUR/USD falling below 1.11 or the DXY Index rising above 1.01 again, USD/CHF will struggle to re-enter its previous two-year range of 0.84-0.92. 


Quote of the Day
“There are three kinds of brains: One understands of itself, another can be taught to understand, and the third can neither understand to itself or be taught to understand.”
     Niccolo Machiavelli

April 24 in history
The Hubble Space Telescope was launched in 1990.






 

Philip Wee

Senior FX Strategist - G3 & Asia

[email protected]