The Swiss franc was the best performing currency last year. While major geopolitical events had an impact on the global economies and, in turn, forex currency pairs, the franc maintained its position at the top, seeing elevated trading levels.
But what sets this currency apart? Why is it faring so well in the face of some of the biggest upheaval we’ve seen in decades?
What happened in the last year?
The Eurozone has dealt with – and continues to deal with – some major political uncertainties n the last year. In fact, the European Parliament set out some of the biggest issues that were to come in 2023. These included the ongoing Ukraine-Russia war and inflation.
But towards the end of last year, the Middle East global crisis and the reemergence of Donald Trump in the running for the next US election added to the list of global political concerns. These all impact on how currencies perform. The Russian rouble, for instance, has seen its value negatively impacted as a result of the war in Ukraine.
However, the Swiss franc has remained strong and stable. Why is this? And is it a viable currency for forex traders to invest in?
Switzerland’s neutrality
The Swiss franc has long been established as a safe haven in times of market stress or volatility. This is because Switzerland has been consistently economically stable, with low debt levels and hard assets like gold. Its economy weas never impacted in the same way as other countries during the world wars, due to its neutral status in both instances, plus it refrained from entering the EU.
All of these contributing factors make the Swiss franc an attractive prospect for investors. The level performance of this currency, combined with Switzerland’s reputation for not wanting to rock the boat make it a stable economy to back as a trader, regardless of the bigger political picture.
We see more and more traders using platforms like Tradu to follow the franc’s performance. While there are reports that we could see the Swiss franc lose momentum in the coming months, we know that this isn’t likely to last.
National Bank intervention
The Swiss National Bank (SNB) manages currency reserves. One of the bank’s main roles is to intervene in the foreign exchange market. According to a report by Reuters, it’s thought that the SNB might have sold francs to weaken the currency. This is one possibility, especially as the SNB has the power to do this and also is acting at time when inflation is where the SNB wants it to be.
It’s understandable that, in light of the events of the last few years, we’re seeing the franc becoming the major hedge currency against weaker currencies. But as the SNB intervenes, it’s important that traders utilise the tools in their platform to assess how the bank’s involvement affects the way the franc moves.
The value of the franc may drop. After 2023 when it was on the rise, it could depreciate in the coming months. But whatever happens, history shows us that it’s likely to always remain strong – especially if traders continue to seek solace in this safe currency.
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