Difficult Situation in Israel Can Trigger Further Demand for CHF

Difficult Situation in Israel Can Trigger Further Demand for CHF

October 12, 2023

Hamas Attacks

The sudden heavy escalation of the conflict between Israelis and Palestinians has shocked the world. The Israeli military has reported that more than 1,200 people, including 155 soldiers, have been killed in Israel since Saturday's attack. Whereas the health ministry says about 1,100 people have been killed and more than 5,000 wounded in Gaza. The United Nations Palestinian Refugee Agency says 250,000 people have been displaced in Gaza. Since Saturday’s attack dozens of Israeli aircraft attacked more than 200 targets in the Gaza City area. Additionally, Lebanese militant group Hezbollah fired rockets at an Israeli military position in the northern border town of Aramsha on Wednesday. A similar attack was fired from Syrian territory. As a reply, the Israeli armed forces carried out rocket attacks in the territories of both Lebanon and Syria. The conflict is arising, and does not seem to be anywhere close to the ending.

CHF in Favor

The terrorist attacks carried by the Hamas organization over the weekend and harsh reply form the Israelian forces in Gaza has triggered action from investors on financial markets. Many of them decided to sell off risky assets and invest in safe haven ones – popular move was to buy Swiss francs. CHF is still considered a safe haven currency, the best one to invest in times of trouble. Also the US dollar returned to favor of investor. Both currencies’ exchange rates were going up, versus euro and other counterparties.

What’s Next?

The tense situation in the Middle East means worldwide currencies will be heavily influenced and their exchange rates will fluctuate. No doubts, safe-haven currencies like Swiss franc and US dollar will be sought by investors. CHF exchange rate can further go up, with euro declining. But in case any successful attempt to alleviate or contain the ongoing conflict will appear, risky currencies can come back to favor again, with investors undoubtedly welcoming such situation. They might be eager to sell Swiss francs in such circumstances that can prompt lower exchange rate versus euro.

Further Demand for CHF

On Wednesday Gaza authorities reported that the only power plant running in the area would run out of fuel within hours, leaving the territory without electricity. Israel has previously completely cut off supplies. An Egyptian official said on Tuesday in a statement to “The Times of Israel” that Israel has informed Cairo that it is preparing for a months-long military ground invasion of Gaza. "Any expansion of the war is likely to raise fears of oil supply disruptions and trigger further increases in demand for safe-haven assets such as gold, the U.S. dollar and the Swiss franc," BNY Mellon analysts said in a report.

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