Swiss Franc Softens as Dollar Stabilizes After Last Week's Selloff

USD/CHF traded near 0.80238 on Monday, edging higher intraday, supported by the dollar stabilizing after last week's selloff triggered by the US Treasury's announcement of increased long-term bond buybacks. Market sentiment has calmed after digesting the initial impact of the bond policy shift, providing a brief breathing window for the dollar.

**Dollar Stabilization and Geopolitical Risks Dual Drivers**

The dollar's stabilization is the direct catalyst for the franc's softening. Last week, the US Treasury announced increased long-term bond buybacks, which initially sparked a dollar selloff, but early this week market reactions have turned more rational, with the dollar index halting its decline and stabilizing. Meanwhile, geopolitical tensions have escalated again, with Washington unveiling a new round of sanctions against Tehran, making US-Iran relations a short-term market focus. Although risk-off sentiment typically favors the franc, in this cycle the dollar's active stabilization momentum has temporarily outweighed the safe-haven demand supporting the franc.

**Divergent Monetary Policy Expectations Form Medium-Term Backdrop**

From a longer perspective, the franc's mild depreciation pressure also relates to divergent monetary policy expectations among major central banks. Market reports indicate traders are weighing softer US labor market data against a hawkish Federal Reserve outlook, keeping the dollar range-bound. In contrast, the Swiss National Bank's (SNB) monetary policy stance is relatively dovish, with markets widely expecting the SNB to regularly intervene in the FX market to prevent excessive franc appreciation from undermining export competitiveness. This policy expectation gap makes the franc more prone to pullbacks when the dollar rebounds.

**Focus on US-Iran Developments Ahead**

In the near term, USD/CHF's trajectory will continue to be driven by the evolution of US-Iran tensions and market repricing of the Fed's policy path. Should geopolitical risks escalate further, the franc's safe-haven appeal may regain buying interest, capping upside for the exchange rate. Conversely, if tensions ease, the dollar's stabilization trend is likely to persist, pushing the pair to a modest rebound.