What Is USD/CHF?
The parity between the US dollar and the Swiss franc is called USD/CHF. It is therefore the exchange rate of the greenback expressed in Swiss francs. USD/CHF encompasses about 4% of total annual foreign exchange transactions, becoming the fifth most traded currency pair in the world. Its historical volatility is quite high with 130 pips maximum discount since its first quotation. This pair is listed in 4 or 5 decimals depending on the broker and its exchange rate is floating because it depends on the demand and the offer. The USD/CHF pair is what is called a trend pair which means, to be clear, that its movements, whether bullish or bearish, are both strong and long which is therefore ideal for the swing trading method. Among other things, the Swiss franc is considered as a safe haven and this greatly influences the prices of this pair in a period of recession in the financial markets.
Which Organizations Set the USD/CHF Rate?
Currency interest rates are set independently by the competent bodies that depend directly on the country or group of countries to which they belong. As for the USD/CHF, the dollar interest rate is set by the Fed, the US Federal Reserve. As regards the interest rate of the Swiss franc, the assignment is entrusted to the SNB, the Swiss National Bank. Interest rates are obviously not fixed and are regularly revalued upwards or downwards. The economic calendar shows these changes. Why Does the Interest Rate Affect The USD/CHF Price? When one of the aforementioned bodies decides to revise the interest rate of its currency, there is usually a change in the price of the pair in question. It is indeed all the more interesting to sell a currency the higher the interest rate and vice versa.
What Are the Advantages of The USD/CHF as an Asset?
What Are the Drawbacks?
Now that you know the different advantages of the USD/CHF currency pair, we suggest that you find out what its flaws are and therefore the risks to be taken into consideration before embarking on your speculation. First of all, the fact that the Swiss franc is considered a safe haven can be both a quality and a defect. In fact, even the US dollar is considered as a reserve currency especially in times of crisis and can therefore be difficult, during periods of uncertainty, to know to what value investors will be oriented and therefore how the currency pair will behave.
Currency Pairs Related to USD/CHF
As you certainly know already, there are numerous correlations between the evolution of exchange rates of different money market currencies. We therefore propose to discover here the positive and negative correlations of USD/CHF with other pairs. As for the positive correlations, that is the currency pairs that generally evolve in the same direction as the USD/CHF, we find in particular the pairs GPB/USD, AUD/USD and EUR/USD. This is due to the fact that in these cases the quoted currency is the US dollar and therefore the changes that interest it affect all these currency pairs. Similarly, there are also negative correlations of the USD/CHF currency pair with other pairs and, as a rule, this currency pair will evolve in a reverse direction to that of the USD/JPY and USD/CAD pairs.
To conclude this article, we offer a complete history of the USD/CHF currency pair. This currency pair has been known since 1850, when the Swiss franc was launched on the market. Since then, USD/CHF has become the sixth most traded currency pair in the world while at its origins it served primarily to ensure the stability of trade between Switzerland and the United States. US investments in Switzerland now account for around 130 billion dollars that make the United States the number one investor in Switzerland, which has obviously contributed to increasing the awareness of this pair.
Tips for Trading the USD/CHF
To trade this currency pair, it is necessary to consider several important indicators such as news on the economic policy of both countries. You already know that in the United States this policy is conducted by the Federal Reserve while in Switzerland the Swiss National Bank is in charge. The latter often carries out transactions in the foreign exchange market to control the quotation of its currency. The EUR/CHF quotation may also influence that of the USD/CHF because there is a positive correlation between these two parities
Where and How to Trade the USD/CHF?
Individuals wishing to invest in the foreign exchange market by dealing in particular with USD/CHF or other currency pairs can now do so via online trading platforms. Just sign up for itbfx.com and create an account to start investing in the foreign exchange market.