Swiss franc continues to gain value despite intervention
The Swiss franc is continuing to rise against the US dollar and the euro, despite heavy intervention from the Swiss National Bank.
Finance experts cannot understand the rise in the Swiss franc’s value
Many economic experts and finance advisors are unable to understand the continuous increase in the Swiss franc’s value. In financially turbulent times, the Swiss franc often surges as investors and international companies seek a safe place to keep their assets. However, during the COVID-19 pandemic, experts have seen no obvious reason for the increase in demand for Swiss currency, since the global economy is recovering overall.
In February 2021, one euro was bought 1,11 Swiss francs, but this has now dropped to 1,05, showing the surge in the value despite the central bank intervening with the market at a rate of one billion Swiss francs per week.
Is a strong Swiss franc advantageous?
The impact of a continuous appreciation of the Swiss franc can be felt across the board in Switzerland. While a stronger currency makes foreign imports into the country cheaper (an especially helpful situation for important imports during the pandemic that supports Swiss businesses and hospitals) and in the long run, it could make the post-pandemic economic recovery more difficult.
Swiss exports, such as tourism and other service-based industries will become more expensive, meaning foreign investment into Switzerland could decrease.
Analysts at one of the world's largest banks, Deutsche Bank, predicted that the Swiss franc is currently being used to hedge against the threat of stagflation. Experts are concerned that stagflation - high inflation coupled with low economic growth - could create issues for the world economy as countries reopen their borders to trade as COVID-19 cases fall.