ZURICH. The franc gave back part of Monday’s gain before Zurich had properly started the day. USD/CHF was quoted around 0.8280 in Asian trading on Tuesday, after two sessions in which the dollar had been on the front foot, as traders waited for the Federal Reserve. A decision is due on Wednesday. The useful news is not the exchange rate to four decimals. It is that the pause everyone priced on Monday is still the pause, and the currency has stopped rewarding it.
The CME FedWatch tool put the chance of no change this week at 89.5 per cent, a shade under the 90.6 per cent priced on Monday morning. The chance of a hike in December moved the other way, to 82.3 per cent from 79.7. The market is not debating October. It is debating how soon the pause ends.
A yield that still flatters the franc
What kept the move small was the usual Swiss bid. The ten-year Confederation yield sat near 0.47 per cent, pulled down by demand for a safe asset while investors argue about Europe’s public finances. A currency that firms when foreign yields fall does some of the National Bank’s work without a decision in Zurich. On Tuesday that demand was enough to slow the dollar, not to reverse it.
The National Bank’s latest minutes still fit this tape. Policymakers were reported to have seen inflation pressures without a spillover into the wider economy, and to have tied the recent rise in prices mainly to oil and to the franc’s own earlier depreciation. That is the same split as the September assessment: imported inflation, no rush, and a December meeting that remains the next time the governing board has to speak on the record.
Wednesday is the real open
For the SMI, Tuesday is a holding session in front of two events that will move Swiss prices more than the Asian dollar will. The Fed speaks on Wednesday. So does UBS, which publishes third quarter results the same day, with parliament still arguing over how much capital the bank must hold. Monday’s indication near 14,495, after Friday’s drop to 14,462, was a modest open. It is not a view on either of those.
Exporters should not treat 0.828 as a new regime. The franc is softer than it was at 8.40am on Monday, when the dollar bought 0.8253 francs, and it is still far from the ten-year highs against the euro that dominated the spring. Households should keep watching oil, which is what pushed Bern to open the diesel reserve, rather than a third digit on the dollar.
The December assessment in Zurich is the date that belongs to the National Bank. Between now and then the market has a Fed decision, a UBS set of figures, and a franc that rallied for a day and then waited. Readers who want that calendar in one place can {{/index.html#subscribe|sign up for the Investment Briefing}}, free on Sunday mornings.