Forex Currencies: The USD/CHF
  1. Forex Currencies: Introduction
  2. Forex Currencies: Trading Strategies
  3. Forex Currencies: Ways To Trade
  4. Forex Currencies: The Four Major Pairs
  5. Forex Currencies: The EUR/USD
  6. Forex Currencies: The USD/JPY
  7. Forex Currencies: The GBP/USD
  8. Forex Currencies: The USD/CHF
  9. Forex Currencies: Commodity Pairs (USD/CAD, USD/AUD, USD/NZD)
  10. Forex Currencies: Currency Cross Rates
  11. Forex Currencies: Emerging Market Currencies
  12. Forex Currencies: Conclusion

Forex Currencies: The USD/CHF

By Brian Perry

Switzerland
is known as a stable, safe and prosperous nation. Surrounded by the Alps and with a reputation for neutrality, Switzerland has long appeared to be almost a world unto itself. Economically, this reputation has been enhanced by the famous secrecy of the Swiss banking system. Although Swiss banking rules have loosened somewhat in the past 10 years, Switzerland remains an international hub of private banking, insurance and investment management. In addition, Swiss citizens enjoy one of the highest standards of living in the world. (To read more about Swiss banking, see What are the Gnomes of Zurich? and How do I open a Swiss bank account and what makes them so special?)

Although the country remains outside the European Union to maintain its neutrality, Switzerland does enjoy extensive trade with its European neighbors, the United States, and other countries around the world. Switzerland is also home to large multinational corporations such as the banking giants, UBS (NYSE:UBS) and Credit Suisse (NYSE:CS), and the consumer products company, Nestle.

The Swiss Franc
Switzerland's currency plays an important role in the international capital markets. Because of Switzerland's historic political neutrality and reputation for stable and discreet banking, the Swiss franc is commonly viewed as a safe haven in international capital markets. As such, many investors prefer to hold a portion of their assets in the Swiss franc. Many other traders flee to the safety of the Swiss franc during times of international turmoil. Therefore, when volatility appears in the financial markets, investors often bid up the Swiss franc at the expense of other currencies.

Trading the U.S. Dollar/Swiss Franc
Although it is somewhat less liquid than the euro and the pound, the Swiss franc is still an easy currency to trade. The factor most likely to cause large movements in the value of the Swiss franc is international political and economic instability. When either political or economic turmoil increases, investors flee to the perceived safety of the Swiss franc. When volatility decreases, the Swiss franc typically sees less interest from traders and investors.

While the Swiss franc often does rise against most other currencies during volatile periods, forecasting the relative performance of the Swiss franc versus the U.S. dollar can be difficult, because the U.S. dollar is also viewed as a safe haven during times of turmoil. Therefore, it is not always easy to determine whether the Swiss franc or the U.S. dollar will be the preferred source of safety during an international crisis. Since each crisis is unique, a determination must be made as to whether the Swiss franc or the U.S. dollar is the preferred option for investors seeking safety.

During less volatile times, traders should note that the Swiss franc has a very high correlation to the euro. When the value of the euro increases, so too does that of the franc. If investors witness a rise or decline in the euro without a corresponding move in the franc, they may want to consider initiating a trade based on the belief that the franc will eventually resume its historical correlation with the euro. Although this type of relative value trade is extremely popular in the financial markets (and often profitable), traders should bear in mind that there is no guarantee that markets will revert to their historical mean. (To learn about another popular pair that includes the "Swissie", see Making Sense Of The Euro/Swiss Franc Relationship.)

Forex Currencies: Commodity Pairs (USD/CAD, USD/AUD, USD/NZD)

  1. Forex Currencies: Introduction
  2. Forex Currencies: Trading Strategies
  3. Forex Currencies: Ways To Trade
  4. Forex Currencies: The Four Major Pairs
  5. Forex Currencies: The EUR/USD
  6. Forex Currencies: The USD/JPY
  7. Forex Currencies: The GBP/USD
  8. Forex Currencies: The USD/CHF
  9. Forex Currencies: Commodity Pairs (USD/CAD, USD/AUD, USD/NZD)
  10. Forex Currencies: Currency Cross Rates
  11. Forex Currencies: Emerging Market Currencies
  12. Forex Currencies: Conclusion
RELATED TERMS
  1. USD/CHF (U.S. Dollar/Swiss Franc)

    The abbreviation for the U.S. dollar and Swiss franc (USD/CHF) ...
  2. Swiss National Bank

    The Swiss National Bank is the bank that is responsible for setting ...
  3. CHF

    In currencies, this is the abbreviation for the Swiss franc. ...
  4. Swissie

    A slang term for the Swiss franc. The Swiss franc, or Swissie, ...
  5. CHF (Swiss Franc)

    The currency abbreviation for the Swiss franc (CHF), the currency ...
  6. SIX Swiss Exchange

    Switerzland's primary stock exchange, located in Zurich. The ...
RELATED FAQS
  1. How do I open a Swiss bank account, and what makes them so special?

    Surprisingly, opening a Swiss bank account is not that much different from opening a standard bank account because you have ... Read Answer >>
  2. What are the Gnomes of Zurich?

    The "Gnomes of Zurich" is a euphemism for Swiss bankers. The name is meant as an insult because gnomes, most often found ... Read Answer >>
  3. Is France a developed country?

    Discover what qualifies France as a developed country and how its diverse economy has helped it become one of the largest ... Read Answer >>
  4. What developed countries have the highest concentration in the banking sector?

    Learn about the developed countries that have the greatest concentration in the banking sector and the most important emerging ... Read Answer >>
  5. What am I buying and selling in the forex market?

    The forex market is the largest market in the world. According to the Triennial Central Bank Survey conducted by the Bank ... Read Answer >>
  6. When and why did the euro make its debut as a currency?

    On January 1, 1999, the European Union introduced its new currency, the euro. Originally, the euro was an overarching currency ... Read Answer >>

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