Swiss franc remains haven of stability in a troubled world
By Dan Atkinson
12:36, 24 October 2018

Switzerland’s mighty money, the strongest currency in the world, is once more providing a safe haven in turbulent times.
While financial markets worldwide suffer volatility and uncertainty, the Swiss franc has held rock-steady against other major currencies during the past 12 months.
Against the dollar, it ended the period where it started, at $1.005, with a peak during the year of $1.08 and a trough of $0.99.
Its value against the euro was €0.86 a year ago and €0.88 now, peaking during the year at €0.89 and touching bottom at €0.83.
IMF seal of approval
And against sterling, it stood at £0.79 a year ago, its peak for the period, and at £0.77 now, with a trough during the year of £0.76.
Indeed, so buoyant is the franc - the last European currency to use the denomination since Belgium and France joined the euro – that its popularity among traders and investors can be a problem, not least for Switzerland’s exporters, whose goods become more expensive abroad when the currency appreciates.
The reference to real terms indicates inflation has been taken into account, while the “effective” rate measures the franc against a basket of major currencies.
Underpinning the franc’s strength are the stability of Switzerland’s banking system, the country’s good historical record of controlling excessive inflation and the robust state of its economy. The IMF noted: “After a subdued start to 2017, GDP growth accelerated to 1.1% last year, and the positive momentum continued in the first quarter of 2018.”
It added: “Policies adopted in recent years have aided the recovery and mitigated risks. The two-pronged approach to monetary policy – combining a negative interest rate with foreign currency purchases – has supported the return of modest inflation and the recovery of growth.”
Modest international role
The IMF “commended the Swiss authorities for skilfully navigating the economy through challenging times”.
So steady has the franc proved that there have been suggestions it ought to become the world’s anchor currency, replacing the dollar. But Switzerland has rejected such suggestions, having no wish to shoulder the burdens that come with custodianship of a reserve currency.
These include having a large chunk of the total currency issue in foreign hands, either central banks or non-Swiss corporations. This, in turn, would weaken the control of the Swiss authorities.
Perhaps ironically, given Swiss determination to keep the franc as a national currency, it does have an international role, albeit a modest one. The franc is legal tender not only in Switzerland but also in Liechtenstein and in Campione d’Italia, an exclave of Italy that is surrounded by Swiss territory.