What is the 'CHF (Swiss Franc)'

The CHF is the currency abbreviation for the Swiss franc, which is the currency of Switzerland. The country's official name is the Swiss Confederation, which dates back to 1291; the abbreviation "CHF" is derived from the Latin name of the country, "Confoederatio Helvetica," with the "F" standing for "franc." The Swiss franc was officially recognized as Switzerland's currency in May of 1850, when it replaced several currencies issued by the different cantons.

BREAKING DOWN 'CHF (Swiss Franc)'

Switzerland is comprised of 26 different cantons, and there are four official languages: German, French, Italian and Romansh. The Swiss franc is one of the few unifying characteristics of the country; it is also legal tender in the Principality of Liechtenstein. The Swiss Federal Constitution of 1848 specified that only the federal government would be permitted to issue money, and the franc was introduced two years later.

Background

Between 1865 and the 1920s, Switzerland, Belgium, France and Italy formed the Latin Monetary Union; the prices of all four currencies were linked to the price of silver. The Swiss franc was part of the Bretton Woods exchange rate system that was established in the aftermath of World War Two and lasted until the early 1970s. The currency's exchange rate was tied to the price of gold until a referendum in May 2000.

Switzerland is known for its neutrality: It has not participated in an armed conflict since 1815. The country's banks have had a policy of secrecy dating back to the Middle Ages, and this was written into law in 1934. The secrecy laws were amended in 2009 to limit tax evasion by non-Swiss account holders.

Safe Haven Status

The Swiss National Bank has long followed a zero inflation policy; this has combined with the country's political neutrality to make the franc an exceptionally strong and stable currency. The franc's so-called safe haven status means that it appreciates during times of economic and political instability; this was particularly the case when the European debt crisis erupted in 2008. In September 2011, the Swiss National Bank began an active policy of intervention in the currency markets combined with interest rate cuts in order to weaken the franc against the euro, capping its strength at 1.20 francs to the euro. The SNB introduced a policy of negative interest rates in December 2014, but the currency continued to appreciate. The 1.20 cap was abandoned in January 2015.

Trading the Franc

The Swiss franc is actively traded in the foreign exchange spot and forward market. It's most active against the euro, but is also frequently traded against the U.S. dollar, Japanese yen and British pound. The low interest rate environment means that speculators frequently borrow in francs to invest in high yielding currencies and other assets around the world.

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