Swiss Franc weakens as US Dollar gains on Fed rate hike odds

The Swiss Franc has been on a downward trajectory as the US Dollar gains strength, driven by expectations of a Federal Reserve rate hike. During Asian trading hours on Monday, the USD/CHF pair hit around 0.8180, reflecting the currency's declining value. This gain in the USD is attributed to the likelihood of a quarter-point rate hike at the Federal Reserve's upcoming meeting, with market sentiment now at nearly 87%, compared to 59% a week earlier.

The US Consumer Price Index (CPI) increased by 0.4% month-over-month in August, aligning with the anticipated interest rate hike. The core CPI, excluding volatile food and energy prices, also rose by 0.3% month-over-month, exceeding expectations. Meanwhile, the Swiss Franc faces downward pressure due to widening interest rate differentials with the US and speculative yen-carry trades.

A hawkish stance from the Bank of Japan and interventions by the United States and Japan have made the Japanese Yen less attractive, prompting investors to shift to the Swiss Franc. However, the Swiss National Bank (SNB) is expected to keep its key rate unchanged, setting it apart from other major central banks. Traders are watching for a potential break above the 0.8155 support level, which could trigger further gains for the USD/CHF pair.