Franc wallows at three-week low as Swiss inflationary pressures decline

Swiss franc fell in European trade against a basket of major rivals on Tuesday, extending losses for the second straight against dollar and almost plumbing a three-week low as inflationary pressures on the Swiss National Bank decline.

Inflation has stabilized for the second straight month below the 2%% target, casting doubts about upcoming potential Swiss interest rate hikes. 

USD/CHF rose 0.4% to 0.8764, with a session-low at 0.8719, after closing down 0.1% on Monday, resuming losses and edging near a three-month trough at 0.8805. 

Swiss Inflation

Recent Swiss data showed consumer prices rose 1.6% y/y in July, the fifth monthly slowdown in a row, down from 1.7% in June. 

Total inflation has stabilized below the 2% target in Switzerland for the second month in a row, showcasing the success of the central bank's monetary policies.

The SNB

The Swiss National Bank raised interest rates by 25 basis points in June to 1.75%, the highest since 2008, in order to contain high inflation rates.

And indeed, inflation has declined to 1.6% in July, showing the success of the SNB's efforts to combat high consumer prices. 

The SNB asserted the importance of the local currency "franc" to have a modulatory and repressing role over inflation in the short term, therefore it's expected the SNB will intervene to support the currency in the future.