USD/CHF ticks down to near 0.7910 as US Dollar falls back
- USD/CHF trades mildly lower to near 0.7910 as the US Dollar corrects further.
- Weak US ISM Manufacturing PMI data for December came out as a major drag on the US Dollar.
- Investors await the Swiss CPI and the US NFP data for December.
The USD/CHF pair edges lower to near 0.7910 during the Asian trading session on Tuesday. The Swiss Franc pair faces mild selling pressure as the US Dollar (USD) extends its correction, following a pullback on Monday.
As of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades 0.12% to near 98.20. The DXY posted a fresh over-three-week-high at 98.86 on Monday as its safe-haven demand increased after Washington captured Venezuelan President Nicolas Maduro over drug-trafficking charges.
US Dollar Price Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.08% | -0.09% | 0.03% | 0.00% | -0.14% | -0.18% | -0.05% | |
| EUR | 0.08% | -0.01% | 0.11% | 0.09% | -0.06% | -0.10% | 0.04% | |
| GBP | 0.09% | 0.01% | 0.13% | 0.10% | -0.04% | -0.09% | 0.04% | |
| JPY | -0.03% | -0.11% | -0.13% | -0.00% | -0.15% | -0.20% | -0.07% | |
| CAD | -0.01% | -0.09% | -0.10% | 0.00% | -0.15% | -0.20% | -0.07% | |
| AUD | 0.14% | 0.06% | 0.04% | 0.15% | 0.15% | -0.04% | 0.08% | |
| NZD | 0.18% | 0.10% | 0.09% | 0.20% | 0.20% | 0.04% | 0.12% | |
| CHF | 0.05% | -0.04% | -0.04% | 0.07% | 0.07% | -0.08% | -0.12% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
The US Dollar has come under pressure amid a lack of supportive fundamentals on the domestic side. The US ISM Manufacturing PMI data, released on Monday, showed that the factory activity contracted again. The Manufacturing PMI came in at lower at 47.9 from 48.2 in November.
Investors brace for more volatility in the US Dollar with the US Nonfarm Payrolls (NFP) data due for release on Friday. The US official employment data will significantly influence market expectations for the Federal Reserve’s (Fed) monetary policy outlook, as almost every policymaker has warned of downside labor market risks.
Before the US NFP data, investors will focus on the ADP Employment Change and the ISM Services PMI data for December, and the JOLTS Job Openings data for November, which will be published on Wednesday.
Meanwhile, the Swiss Franc (CHF) trades broadly calm ahead of the Consumer Price Index (CPI) data for December, which will be released on Thursday. The inflation data will influence the Swiss National Bank’s (SNB) monetary policy expectations.
US Dollar FAQs
The US Dollar (USD) is the official currency of the United States of America, and the ‘de facto’ currency of a significant number of other countries where it is found in circulation alongside local notes. It is the most heavily traded currency in the world, accounting for over 88% of all global foreign exchange turnover, or an average of $6.6 trillion in transactions per day, according to data from 2022. Following the second world war, the USD took over from the British Pound as the world’s reserve currency. For most of its history, the US Dollar was backed by Gold, until the Bretton Woods Agreement in 1971 when the Gold Standard went away.
The most important single factor impacting on the value of the US Dollar is monetary policy, which is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability (control inflation) and foster full employment. Its primary tool to achieve these two goals is by adjusting interest rates. When prices are rising too quickly and inflation is above the Fed’s 2% target, the Fed will raise rates, which helps the USD value. When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates, which weighs on the Greenback.
In extreme situations, the Federal Reserve can also print more Dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system. It is a non-standard policy measure used when credit has dried up because banks will not lend to each other (out of the fear of counterparty default). It is a last resort when simply lowering interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy US government bonds predominantly from financial institutions. QE usually leads to a weaker US Dollar.
Quantitative tightening (QT) is the reverse process whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing in new purchases. It is usually positive for the US Dollar.
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