The US dollar has been fairly strong against the Swiss franc during trading on Wednesday as we continue to see a lot of noisy trading in general.
It's worth noting that market participants continue to see the interest rate differential as something to take advantage of and in this environment that does make a certain amount of sense considering that bond markets have essentially been on fire and yields have been screaming to the upside.
With this, I wait to see what happens next, but I do believe that overall, the United States will continue to be a place people run towards in the environment of such global chaos. After all, with higher yields, it does make a certain amount of sense that we would see the US dollar be attractive against a currency like the Swiss franc that has basically 0 interest on its overnight swap and of course a Central Bank that will work actively against the value of its own currency if it gets out of hand.
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Interest Rates and Psychological Levels
With that being the case, I like the idea of buying and holding, but I also recognize that you have to have a reasonable position size in this environment because quite frankly this market demands it as there have been many headlines that have shaken the nerves of traders in general.
Bond yields in America continue to climb and we even touched 4.50% at one point during the session, which of course is a big psychological level that will attract a lot of attention. Ultimately, as long as these rates stay fairly strong in the United States, I think you've got a situation where you just don't want to buy the Swiss franc against it, despite the fact that the Swiss franc is considered to be a safety currency.
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