Home Insights The International Financial Crisis and the Swiss Franc

The International Financial Crisis and the Swiss Franc

by Jackson B

One needs to learn the values of different currencies in order to have an idea about their strength or weakness. One also needs to know which currency has more purchasing power in a particular situation. Basically, one should be aware of what the currencies are worth at a specific time. This is not an easy task to accomplish. Currency dealers have made it more complex and difficult by introducing different combinations. Even for a layman, it can be really difficult to determine which currency is stronger or weaker than the other.

The values of the major currencies fall and rise all the time. One has to keep track of different factors for determining which currency has more purchasing power at any given time. When it comes to tourism and travel, this seems much easier and simpler to do. However, when it comes to stocks and shares, Forex traders have to make very detailed analysis in order to predict how a particular stock or share will perform. The same thing goes with currency pairs like the USD/JPY and EUR/USD.

In technical terms, the Swiss Franc and the Swiss Dollar are technically the same currency. There are times when the Swiss Franc strengthens against the US Dollar while there are times when the CHF weaken against the USD. In terms of monetary system, there is no way of telling which currency is stronger or weaker just by monitoring the market moves.

The market operations are the key to arrive at conclusions regarding which currency is more valuable or weaker. There are several things to consider when it comes to determining the relative strengths of the Swiss Franc and the US Dollar. One of them is the current exchange rate between the two currencies. Swiss Franc strength is indicated by the fluctuations in its exchange rate with that of its principal economic partner. On the other hand, a Swiss Dollar weakness is indicated by market operations that show that the interest rates of both currency pairs are highly correlated with one another.

Another thing that affects the relative strength or weakness of a currency pair is the stance of its central bank. The decision of the central bank to release additional Swiss Francs in the market may indicate that the economy needs more external help. Likewise, the central bank of a non-Swiss country may also work toward an appreciation of its currency against the USD. Both these things can and do affect the Swiss Franc as well. The Swiss government has recently made noises indicating that it may move the Swiss Franc up or down against the USD.

In relation to other major currencies, the Swiss Franc has been relatively strong in relation to some major currencies. For example, the Euro has been relatively strong versus the Swiss Franc over the last year. The Euro has also been stronger versus most other major currencies on a year by year basis. The combination of these factors means that the Swiss Franc is now relatively weak in comparison to the Euro and the US Dollar.

One of the reasons why the Swiss Bankcracy has taken action to support its currency is because it believes that its currency is under attack from the Eurozone. The Eurozone is in an economic downturn that points to problems in its growth prospects for the future. One possible reason for this could be that Europe’s growth engine, the Eurozone’s economic powerhouse, is struggling to maintain its recent high levels of inflationary pressure. The ongoing low inflation level in Europe’s economy has lead to deflation, which is a decrease in overall economic activity that leads to lower economic activity. This lowered economic activity translates into lower currency rates for Swiss citizens.

Another possible reason why the Swiss Bank reacted so strongly to the global economic crisis might be related to the fact that the Swiss economy is heavily dependent on foreign trade. Foreign trade is a major contributor to Switzerland’s Gross Domestic Product (GDP). With less trade with European Union countries and Germany in particular, the Swiss Franc could lose much of its value as a result of lost foreign trade. In reaction to this problem, the Swiss Bank has been looking to strengthen its hold on the EUR/CHF pair of currencies.