Swiss Franc Struggles Near Lows, Monetary Policy Divergence Boosts Dollar

USD/CHF consolidated around 0.81815 on Tuesday, slightly below the one-and-a-half-month high hit earlier, with the Swiss franc remaining under sustained pressure. A notable divergence in monetary policy expectations has become the core factor dominating the forex market: markets broadly anticipate a Federal Reserve rate hike at its September meeting, while the Swiss National Bank is expected to keep its zero interest rate unchanged, with the vast interest rate differential outlook providing strong support for the dollar.

**Hawkish Rate Hike Expectations Boost Dollar**

U.S. inflation data reinforced tightening expectations. The latest August core CPI rose 0.3% month-over-month, above the expected 0.2%, lifting market bets on a Fed rate hike at the September 15-16 meeting to 85%. In contrast, Swiss inflation remains mild, within the central bank's 0%-2% target range, and SNB Chairman Schlegel said last Friday outright that "the franc's exchange rate is a challenge for the Swiss economy," hinting the central bank stands ready to curb excessive franc strength. This divergence in policy paths tilts USD/CHF toward further upside in the near term.

**Safe-Haven Demand Flows to Dollar**

Geopolitical tensions have also unexpectedly favored the dollar. U.S.-Iran conflicts have recently escalated again, but in this round of risk aversion, the dollar has replaced the franc as the preferred safe-haven currency. Meanwhile, high oil prices transmit to U.S. inflation far more than to Switzerland, further reinforcing the need for Fed tightening, while the SNB can maintain its accommodative stance due to limited imported inflation.

**Technical Indicators Signal Overbought Risk**

Despite the fundamentally dollar-positive backdrop, technical indicators flash warning signs. The 4-hour Relative Strength Index had previously risen above 80, entering severely overbought territory, suggesting near-term consolidation or even pullback demand for the exchange rate. If USD/CHF can confirm a firm hold above 0.8145, the next target would be the year-to-date high of 0.8207; conversely, a break back below 0.8145 could see a retest of support near 0.8125.