Swiss franc currency characteristics

As Switzerland pursues neutrality and non-alignment, Switzerland is considered the safest place globally and is known as a traditional safe-haven currency. With the Swiss government's protection policies for finance and foreign exchange, a large amount of foreign exchange flows into Switzerland. The Swiss franc has also become a stable and popular currency for international settlement and foreign exchange transactions.

The main characteristics of its cash can be briefly summarized as follows:

Currency name: Swiss franc (SWISS FRANC)


Currency symbol: CHF

Fractional currency carry: 1 Swiss franc = 100 centimes (CENTIMES)

Denominations of banknotes: denominations of banknotes are 10, 20, 50, 100, 500, 1,000 francs, and coins are 1, 2, 5 francs and 1, 2, 5, 10, 20, and 50 cents.

Factors affecting the Swiss franc

Fundamental factors affecting the Swiss franc

Swiss National Bank (SNB): Swiss National Bank. The Swiss National Bank has great independence in formulating monetary and exchange rate policies. Unlike the central banks of most other countries, the Swiss National Bank does not use specific money market interest rates to guide currency conditions. Until the autumn of 1999, the central bank used foreign exchange swaps and repurchase agreements as the main tools to affect the money supply and interest rates.

Due to foreign exchange swap agreements, the management of currency liquidity has become the main factor affecting the Swiss franc. When the central bank wants to increase market liquidity, it will buy foreign currencies, mainly US dollars, and sell Swiss francs, affecting the exchange rate.

In December 1999, the central bank’s monetary policy shifted from the monetarist approach (mainly targeting the money supply) to an inflation-based system. The annual inflation ceiling is set at 2.00%. The central bank will use a specific range of the 3-month London Interbank Offered Rate (LIBOR) as a means of controlling monetary policy.

Central bank officials can influence currency trends through comments on the money supply or the currency itself.

Interest Rates: Interest rates. SNB uses changes in the discount rate to announce changes in monetary policy. These changes have a significant impact on currencies. However, the discount rate is not often used by banks as a discount function.

Swiss franc deposits in non-Swiss banks are called European Swiss franc deposits. The difference between its interest rate and the European deposit interest rate of other countries over the same period is also one factor affecting the exchange rate.

The role of the Swiss franc as a safe-haven currency:  SNB independently formulates monetary policy, the confidentiality of the national banking system, and Switzerland's neutral status. In addition, SNB's sufficient gold reserves also greatly help the stability of the currency.

Economic Data: Switzerland's most important economic data include: M3 money supply (the broadest money supply), consumer price index (CPI), unemployment rate, the balance of payments, GDP, and industrial production.

Cross Rate Effect: like other currencies, cross-exchange rates will also impact the Swiss franc exchange rate.

Other factors: Due to the close ties between Switzerland and the European economy, the Swiss franc and the euro exchange rate are significantly correlated. That is, the rise of the euro will also drive the increase of the Swiss franc. The relationship between the two is the closest of all currencies.