The US dollar plunged against the Swiss franc initially on Thursday but has seen a bit of a bounce as we get to the New York session.
USD/CHF
The US dollar plunged pretty significantly against the Swiss franc early on Thursday but has found a certain amount of support near the 50-day EMA. The 50-day EMA is an indicator that a lot of people will be watching closely as usual, with the whole idea of the marketplace opening up to questions as to whether or not the Federal Reserve is going to cut rates.
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It's still a little bit of a fool's errand to try to guess. After all, we have energy inflation around the world, and just today, Fed Governor Waller said that he was in favor of holding rates steady. In other words, the carry trade is very much alive here in the US dollar versus the Swiss franc currency pair, and therefore, I think we do get a little bit of stabilization and upward pressure.
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Part of this might be knock-on effects from the Japanese obviously intervening in the currency markets, selling the US dollar, but whether or not that is a sustainable break in favor of the Japanese yen remains to be seen. A little bit of patience probably goes a long way in the carry trade right now as central bankers are trying to get traders away from that, but at the end of the day, the bond markets are punishing multiple countries at the same time, and Japan raising rates, if that is in fact going to be a real thing, could cause all kinds of negative consequences to their overall economy.
Ultimately, I think that the Swiss National Bank is probably one of the most stable here, as it has held on to the 0% interest rate attitude and has made no overtures whatsoever on tightening, and therefore, I think this is the cleanest carry trade at the moment. It just has a little bit of noise coming from Asia.
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