On Thursday, the USD/CHF saw intense selling as the risk-aversion trade resurfaced.
Fresh COVID-19 concerns weighed on global risk sentiment, favoring the safe-haven CHF.
The USD has been weakened by the continuous decline in US bond yields, which has added to the selling tendency.
During the first half of the European session, the USD/CHF pair remained highly offered, dropping to one-and-a-half-week lows near 0.9170 in the past hour.
On Thursday, the pair faced some intense selling pressure as it struggled to gain acceptance or expand on the momentum beyond the mid-0.9200s. The sharp drop was fueled by a number of variables and was the first day of a downward trend in the prior four days.
Concerns about the economic consequences of the highly contagious Delta strain of COVID-19 spreading have weighed on global risk sentiment. A sea of red swept the financial markets, giving a big boost to safe-haven currencies like the Swiss franc.
The risk-off sentiment was bolstered by a continuation of the strong drop in US Treasury bond yields. Indeed, the yield on the benchmark 10-year US government bond fell below 1.30 percent, hitting multi-month lows, prompting some long-unwinding action in the US dollar.
However, signs that the Fed is edging closer to tightening its policy this year should help prevent any further losses for the dollar. The minutes of the June FOMC meeting revealed that Fed policymakers agreed on the importance of being ready to act if inflation risk materializes.
Bearish traders should proceed with care and prepare for a further depreciation. The release of the US Initial Weekly Jobless Claims is now anticipated by market participants. This, together with market risk sentiment, might give the USD/CHF pair a boost./n
