Swiss Franc weakens ahead of SNB rate decision

• USD/CHF turns higher on Wednesday after four straight days of losses.
• Hawkish Fed signals lift the US Dollar to a nearly two-month high.
• Attention turns to the SNB decision on Thursday, with markets expecting the policy rate to stay at 0%.

USD/CHF edges higher on Wednesday, snapping a four-day losing streak as the US Dollar (USD) continues to attract buying following the Federal Reserve’s (Fed) hawkish rate hike at its September 15-16 policy meeting. At the time of writing, the pair trades around 0.8234, close to the more than one-year high of 0.8263 touched last week.

The Fed raised rates by 25 basis points (bps), its first hike in three years, as policymakers responded to stubborn inflation and higher energy prices linked to the war in the Middle East. The central bank said the move would help bring inflation back to its 2% target in a timelier manner. Its updated projections put the median rate forecast at 4.1% for both 2026 and 2027, pointing to one more hike this year and no cuts next year.

Recent Fed comments have also leaned hawkish. Richmond Fed President Tom Barkin said on Tuesday the economy may be firming and warned that inflation is not limited to energy and tariff shocks. Boston Fed President Susan Collins said, “A somewhat more restrictive federal funds rate will help ensure that inflation durably returns to target.”

Against this backdrop, the US Dollar remains firmly bid. The US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, trades around 100.90, its highest level since July 30.

The prospect of additional Fed tightening comes as the energy shock from the war in the Middle East keeps inflation risks elevated. US President Donald Trump said on Tuesday at the United Nations General Assembly in New York that US-Iran talks had made progress and described the discussions as productive, but the two sides have not reached an agreement to reopen the Strait of Hormuz.

On the Swiss side, the Swiss National Bank’s (SNB) 0% policy rate leaves the Swiss Franc (CHF) at a yield disadvantage against the US Dollar. The SNB announces its next policy decision on Thursday, with markets widely expecting rates to stay unchanged.

Economists at DBS Group Research expect the SNB to leave its policy rate unchanged, but caution that the central bank is “likely to raise its near-term inflation forecast as elevated energy prices feed through into the economy amid persistent uncertainty in the Middle East.” They add that the SNB may “pay closer attention to the second-round effects highlighted in its June minutes, including processed food, transport, tourism, and restaurants,” as it assesses the breadth of price pressures.

According to DBS, “the hawkishness of any forecast upgrade will depend less on higher near-term inflation than on whether the SNB sees the oil shock feeding into underlying inflation,” with the policy signal hinging on how far these cost increases permeate the broader economy. At the same time, DBS argues that the “SNB should view the Fed and ECB hikes as providing a stronger counterweight to haven demand for the CHF,” potentially easing pressure on the Franc even as domestic inflation risks are reassessed.