Baxia Markets
August 10, 2021

Investors rely on Swiss Franc

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Traders are unconvinced that the franc has gotten too strong even when the Swiss National bank and valuation metrics data show the opposite.

The currency's rise to a nine-month high against the euro has brought investors' valuation back into focus. Yet the central bank's data on accurate effective exchange rates show that the franc has shed most of its premium seen at the height of the pandemic.

Its potential for even more gains remains undiminished as traders say Switzerland's persistently low inflation makes the franc a reliable store of value. And with the euro area's monetary policy poised to remain expansionary and likely to weigh on the euro, the Swiss currency's rally is under no immediate threat.


USDCHF August 9th 2021

The central bank assessed the franc to be "highly valued" in June, and the currency has only strengthened 1.5% since then. It is also the most overvalued currency in the Group of 10. The franc touched 1.07203 per euro on Friday, the most substantial level since November 9.

Still, investors have ignored those signals and piled into the franc alongside the Japanese yen in recent weeks, seeking refuge from fears the spread of the delta coronavirus variant could derail global growth. The plunge in bond yields from Treasuries to bonds has also boosted the currencies' appeal.


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