For several decades, the Swiss franc has been considered a safe-haven asset, a unique success story worldwide.
The Swiss franc remains strong and stable, and its stability reinforces the confidence of international investors.
The history of the Swiss franc is a success story, long attributed by international observers to the fact that Switzerland never experienced wars and, in fact, leveraged this position to become a safe haven for global capital.
This was further supported by the Swiss banking secrecy, which lasted from 1934 to 2013, until then Finance Minister Hans Rudolf Merz declared its end (at least for foreign residents) with the introduction of automatic information exchange with other countries.
The great change
The great change occurred immediately after the 2008 financial crisis, when fears about the stability of the eurozone and global monetary policies led to a sharp appreciation of the Swiss franc against other currencies (+20%, reaching parity with the euro). Everyone remembers September 9, 2011, when the Swiss National Bank (SNB) independently set the CHF/EUR exchange rate at 1.2, stating that it would “no longer tolerate a lower rate”, primarily to protect exports (crucial for Swiss industry) and tourism.
The threshold held until January 15, 2015, when it was abolished, marking the start of negative interest rates (-0.75%) on deposits at the SNB, which initiated a general decline in interest rates.
How it was possible
All of this was made possible thanks to the Swiss National Bank, which intervened heavily to defend foreign currency exchange rates (purchasing EUR and USD on the forex market) to prevent these currencies from depreciating too sharply against the Swiss franc.
The Swiss franc continued to appreciate steadily, eventually becoming consistently stronger than the euro. This confirmed its value as a safe-haven asset and further increased investor confidence.
Finally, we should not forget that the factors that make a currency attractive are always public spending policy, the overall economic framework, and political-institutional stability, areas in which Switzerland stands unrivaled.
Evolution of the EUR-CHF exchange rate from 1999 to today.
Source: SNB – Gruppo Multi elaboration.