- USD/CHF retreats to 0.9250 amid broad-based US Dollar weakness and softer US Treasury yields.
- Swiss National Bank’s decisive action alleviates Credit Suisse’s liquidity concerns.
- Market uncertainty looms as questions on the liquidity front remain unresolved.
USD/CHF retreated from the 0.9300 mark in early Asian trading hours on Friday. The broad-based US Dollar weakness has led the pair to erase some of the previous day’s gains and head toward Thursday’s low at 0.9230. Improved risk appetite has pushed the US Dollar lower amid slightly softer US Treasury yields.
The Swiss Franc has strengthened due to an improvement in the situation regarding the troubled Swiss bank Credit Suisse.
The Swiss National Bank (SNB) quickly stepped in and provided support for Credit Suisse after pressure from international counterparts, according to some reports. Thereafter, SNB showed a willingness to provide a covered loan facility to Credit Suisse to help them escape the liquidity trap.
Credit Suisse said it would borrow up to 50 billion Swiss Francs ($53.7 billion) from the Swiss National Bank. The bank called the loan a “decisive action to preemptively strengthen its liquidity.”
On the United States front, we have seen a cumulative effort to revive First National Bank by key market players like JPMorgan, Citibank, Bank of America, and many others, which provided a pool of liquidity totaling around $30 billion.
The key question still remains unresolved, as the market doesn’t know how many chapters are yet to be disclosed on the liquidity front. USD/CHF could become volatile if we see some escalation of liquidity problems.