The Swiss franc’s performance in the global forex market has remained strong over time. Here’s all the information you need about this currency’s value and history.
Often touted as one of the most stable economies in the world, Switzerland is revered for its monetary heritage and its banks often adopt measures to ensure a strong international investment position, including maintaining a strong balance sheet through hosting more assets than liabilities. It is typical for a Swiss mortgage to be repaid slowly, because then, “the bank owns the house”.
The Swiss franc is legal tender across all 26 cantons of the Swiss Confederation (including the German and Italian enclaves) as well as Liechtenstein. It is the only existing franc in Europe following the introduction of the euro in France in 1999.
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Official signs for the Swiss franc include Fr. SFr. Or FS, Franken (German), franc (French and Romansch), franco (Italian) and its official code, chf. The code chf. comes from the official title Confoederatio Helvetica Franc: French for the Swiss Federation.
In recent years, as many European economies have suffered debt crises and due to accommodative monetary policy from the US Federal Reserve, the Swiss franc has experienced sustained value.
Swiss banking institutions have a strong heritage as safe-havens for depositing foreign wealth. Investors from abroad, including Arabs and Russians profiting from rising oil prices, often bring their wealth to Switzerland, which in turn boosts the economy.
A 1934 privacy and security law criminalising the release of personal information by a banking institution also paved the way for the infamous “secret Swiss bank account”. Its historical neutrality and independence also made it a logical place for hiding or storing finances.
Value and exchange
Unlike other countries, Switzerland has adopted a different approach to sustained currency value. Not opting to devalue currency to boost exports and increase competitiveness, they instead have looked to low taxes causing low debt, investment in local stocks, diversification of assets and high savings rates.
In December 2014, the Swiss National Bank (SNB) introduced a negative interest rate on bank deposits in order to support its franc ceiling, but it had a negative effect on the markets. It abandoned the ceiling altogether in January 2015. This saw the franc rise in value against the euro by as much as 30% almost immediately, but part of the increase reversed quickly. By the end of the day, when the SNB announced its decision to do away with the ceiling, the franc gained more than 20% against the US dollar as well as the euro. The SNB also lowered interest rates, requiring investors to pay more in the form of fees to keep their money in Swiss bank accounts.
The euro’s devaluation against the franc did not bode well for the large export industry in Switzerland, and the sudden jump resulted in some currency traders suffering major setbacks.
However, to the delight of investors, the franc continued to perform well post-Brexit.
The table below shows how the Swiss franc has performed against some other popular currencies.
*Figures as of November 2016.
USD/CHF is a major currency pair, with its strength coming from the USD value and CHF security and neutrality; then there’s also the high liquidity of transactions, global popularity and a large number of players.
AUD/CHF is a less popular pairing, although it has been coined by some as a “carry trade”, because of the risk-on nature of the AUD and safe-haven status of the CHF.
Historically, the Swiss franc experienced an all-time high in April 1972 at 3.88 CHF/USD and an all-time low in August 2011 at 0.72 CHF/USF.
Coins and notes
Banknotes are distributed by the Swiss National Bank, while coins are made and distributed by the Swissmint.
There are seven coins still circulating today: 5 cents, 10 cents, 20 cents, ½ franc, 1 franc, 2 francs and 5 francs. Each coin is composed of 75% copper and 25% nickel, with the exception of the 5-cent coin which owes its golden colour to a higher percentage copper (92%), paired with 6% aluminium and 2% nickel.
Currently, Swiss franc banknotes are available in denominations of 10, 20, 50, 100, 200 and 1,000. Since their inception in 1907, the Swiss franc banknotes have seen nine series (three never issued), with the next series expected in 2016-2017.
According to the 2008 Guinness World Records, the current series of Swiss franc banknotes is the most secure in the world, with up to 18 security features. The ratio of counterfeit notes in Swiss francs is about 1 in 100,000; compare this to the pound sterling, which has a ratio of 1 in 3,333.
Swiss banking institutions and the government have kept in place measures to keep the currency value steady and high with little fluctuation compared to neighbouring markets.