Soaring on a scandal: the Swiss franc has reached heights


In relation to the national currency of Switzerland, the saying "there would be no happiness, but misfortune helped" has fully justified itself. The Swiss franc soared to a 33-month high after adding Switzerland to the list of potential currency manipulators. Experts believe, however, that the rise of this currency will be short-lived.

On Tuesday, January 14, the Swiss currency, previously behaving calmly in the market, showed a strong character unexpectedly. Its growth against the euro was the strongest in the last three years. Against the franc, euro fell to 1.0760 francs, or almost 0.5%. The Swiss currency took advantage of the moment and rose upwards, having significantly strengthened since April 2017.


Meanwhile, in the USD/CHF pair, the situation was different: the franc fell against the dollar. On the morning of Wednesday, January 15, the tandem was trading within 0.9677.


The dollar sank slightly against the franc by 0.4%, up to 0.9669 francs earlier, but then regained its positions. Later on, the USD/CHF pair entered a downward spiral, slipping to 0.9658. At the same time, the Swiss franc strengthened significantly in the European session.


The reason for the rise of the Swiss national currency was the actions of the United States, which added this European country to the list of possible manipulators of exchange rates. According to experts, this inclusion can significantly affect the further actions of the Swiss National Bank (SNB). As a result, the regulator may refuse currency interventions that slow the growth of the franc, which is similar to an escape from potential problems. The country's Finance Ministry, however, denies the negative impact of the US authorities' decision on the national currency.

Recall that on Monday, January 13, the US Treasury Department added Switzerland to the list of countries whose currency practices are causing concern in Washington. The country is accused of actively increasing purchases of foreign currency, starting in mid-2019. Note that in the past few years, the SNB has purchased foreign currency on a huge scale in order to weaken the demand for the franc.

The Swiss regulator denies America's accusations of gaining a trading advantage over other currencies. The department emphasizes that the current interventions were aimed at eliminating the fortress of franc. The SNB also notes that a very high exchange rate negatively affects inflation and the country's export-dependent economy. Analysts emphasized that the Swiss Finance Ministry does not intend to change its currency policy with respect to the franc. They believe that currency interventions serve as a powerful fuel for the "Swiss".

Currently, investors who use the Swiss franc as a safe haven asset during periods of uncertainty are focusing on the currency. The advantage of investing in this asset is the fact that the SNB has set the lowest interest rates in the world to deter investors.

Representatives of the Swiss regulator emphasize that the goal of the country's financial policy is to stabilize prices and control current economic changes. Experts summarize that the Swiss financial authorities strive to achieve a balance in the implementation of this strategy, and most often, they succeed.

The material has been provided by InstaForex Company -