Swiss Franc (CHF) and the Euro (EUR)

Besides United Kingdom, Switzerland is another country that has yet to jump onto the Euro bandwagon. Swiss Franc (CHF) is the currency used  Switzerland and there has been no signals from the Swiss government that they will adopt the Euro anytime soon.

Due to the unique status of Switzerland as a banking haven as well as a self-designated “neutral” country during war times, Swiss Banks are the magnet for storage of investments from wealthy individuals (and sometimes crimimals) all over the world. These people park their investments as gold (stored in gold vaults), in foreign currencies (in Swiss Banks) or simply leave it to investment firms to manage their finances in whatever manner is deemed fit.

Swiss Franc, as a result of Switzerland’s financial stability and reputation, remains one of the most traded currency in the world, ranked 5th, just behind the US Dollar (USD), Euro (EUR), Japanese Yen (JPY) and the Sterling Pound (GBP).

Currently, 1 Swiss franc trades at 0.658 Euros, which has stabilised since the spike in Mar 2009 (between 0.65 and 0.68 within 1 week!). While the Swiss National Bank (SNB) has repeatedly warned that it would act to prevent further appreciation of the franc versus the euro, concerns that a global recovery will be protracted has dimmed the outlook for the demand of Swiss goods. This means that in the medium term, the Swiss National Bank may continue to depreciate the Swiss Franc in an attempt to spur demand.

Interestingly, The Big Mac Index (by the Economist Magazine) has put the Swiss Franc at 68 percent overvalued. Comparatively, the Bloomberg PPP measure estimates that the Swiss Franc is 15 percent overvalued. While there are differences in the valuation, both indexes seems to suggest that the Swiss Franc IS overvalued, in general. This will give the wealthy community some food for thoughts.

Be Sociable, Share!

•