Swiss Franc General Info
Contributing to roughly 5% of the foreign exchange market’s daily turnover, the Swiss franc (ISO: CHF) is the world’s seventh most traded currency.
The Swiss franc is traditionally considered Europe’s safe haven currency due to factors including Switzerland’s traditional position as a politically neutral country, its reputation for stability, impressive financial system, historically low inflation and its ability to consistently run a trade surplus. For this reason, the franc is likely to increase in value during periods of economic uncertainty or when global geopolitical risk is elevated, or during bouts of high market volatility.
To prevent unwanted currency appreciation, between September 2011 and January 2015 the franc’s value was pegged to the euro at a rate of Fr. 1.2. When Switzerland’s central bank unexpectedly abandoned the peg in 2015 it caused significant market turmoil.
Since 1995, against the world’s reserve currency, the US dollar, the Swiss franc’s lowest valuation came in October 2000 when CHF/USD traded at just 0.5465. Its post-1995 high came in August 2011 at 1.4152.CHF Foreign Transfers CHF Travel Money
Swiss Franc - Recent Performance
Against the euro, in mid-October the Swiss franc remained close to long-term lows. The franc had weakened more than 7% on the year to a rate of 1.155 per euro.
In October, USD/CHF twice rallied to 0.9836 – the franc’s weakest level against the dollar in five months.
The Swiss National Bank do not hide their desire for a weaker franc. The bank expressed its happiness with 2017’s depreciation against the euro at its September meeting, saying that recent movements were “helping to reduce the significant overvaluation of the currency.” The bank added that “negative interest rates and the SNB’s willingness to intervene in the foreign exchange market remain essential in order to reduce the attractiveness of [Swiss francs].”
The SNB will get their wish according to analysts at both Credit Agricole and Bank of America Merrill Lynch.
The franc will weaken to 1.18 per euro in the medium term, said Credit Agricole in October. A higher EUR/CHF rate will be driven by the diverging paths of monetary policy between the ECB and SNB.
BAML went one further, predicting that the franc would weaken to at least 1.20 against its bigger brother. BAML believes that investors will sell francs to buy higher-yielding currencies and says that EUR/CHF “looks cheap relative to its longer-term moving averages.”