Forex Trading

What is the Swiss Franc? What influences the Swiss Franc?

Find out more about the Swiss Franc and what influences the Switzerland currency

Swiss Franc Coin

As clearly indicated by the name - the Swiss Frank is the currency of Switzerland. It is also used in Liechtenstein. It is commonly known as "the Swissy". CHF is the official ISO code of the Swiss Frank to be used by the banks and other financial institutions, however many users of the currency, including stores and advertisers, abbreviate it as Swf or SFr for their own convenience. Mainly Swiss Franc is traded with US Dollar in pair.

It is collectively agreed that Swiss Frank is the only currency in the countries of the Euro zone which has the potential to do better than the Euro, in the case of any dissension between the member countries. It is very strongly backed by the gold and is commonly known as the safest currency to trade in.

There are some factors which influence the Swiss Frank. The top of the list is inflation of the economy. Other major factors include economic contraction, excessive economic growth and political instability. It is carefully termed as a “safe haven currency”. Virtually it has no or zero inflation at all. Another reason for the muscle of the Swiss Frank is a legal necessity that at least 40% is supported by the gold reserves.

Higher the prices of gold in the international market, the stronger the Swiss Frank will be. We know that when a country increases its interest rates, the value of its currency also strengthens. It is because of the fact that the foreign investors are magnetised by the higher interest rates. For example, if the banks raise the interest rates in Switzerland, the shareholder may choose to get rid of other currencies and buy more Swiss Francs. In this case, the Swiss Franc will rise as compared to the other currencies. It is considered as a very stable currency in foreign exchange markets of the world.

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