Swiss Franc advances as Dollar slides on US bond buyback surge

USD/CHF depreciates after two days of gains, trading around 0.8000 during the Asian hours on Monday. The currency pair depreciates as the US Dollar (USD) struggles under pressure from newly announced fiscal measures in Washington.

Financial markets were caught off guard when the US Treasury Department pledged to at least double its buybacks of longer-dated government debt to curb rising bond yields. Treasury Secretary Scott Bessent indicated that these buybacks could exceed $4 billion, representing a strategic push to signal that elevated yields fail to accurately reflect underlying economic fundamentals.

Low volatility seen underpinning renewed interest in carry trades

Analysts at ING argue that the US authorities’ greater focus on supporting the Treasury market should be interpreted as a “risk-positive story,” with the bank expecting that “volatility will stay low, and interest will remain firm in the carry trade.” This backdrop, in their view, continues to favour strategies that lean on stable funding conditions and subdued market swings.

However, the Greenback's downside may be constrained by rising safe-haven demand driven by escalating geopolitical tensions in the Middle East. Friction intensified after Iranian Foreign Minister Abbas Araghchi dismissed upcoming US sanctions as an act of desperation, while Iranian Security Chief Mohsen Rezaei warned of "earthquake-like" retaliation if US President Donald Trump takes further action, reinforcing a risk-off mood across global markets.

Meanwhile, the Swiss National Bank (SNB) kept its policy rate at 0% and is expected to maintain this stance through 2027, reaffirming its readiness to intervene in foreign exchange markets to curb excessive franc appreciation. While most economists anticipate the first-rate hike in early 2028, markets are already pricing in a move as early as March 2027, a shift that could make the Franc increasingly attractive as a funding currency for carry trades.

Technical Analysis:

In the daily chart, USD/CHF trades at 0.8000, keeping a bearish near-term tone as price holds below both the short- and medium-term Exponential Moving Averages (EMAs). The alignment of the EMAs above spot suggests the pair remains capped, while the 14-day Relative Strength Index (RSI) around 40 hints at lingering downside pressure without yet reaching oversold conditions.

On the topside, initial resistance is seen at the nine-EMA near 0.8049, followed by the 50-EMA at 0.8060, which together form a tight overhead supply zone that bulls would need to reclaim to ease the current bearish bias. With no nearby structural supports in the data, any further slide from current levels would leave the pair seeking new demand zones below 0.8000, keeping risks skewed to the downside while it trades under these moving averages.