The Swiss Franc hit its highest level versus the Euro (CHF/EUR) in almost three years on Tuesday after developments from the US. After the calming of recent US-China trade tensions, the US has removed China as a ‘currency manipulator’, but has now added Switzerland to the list. Other countries on the list include Germany, South Korea, and Japan.
The US Treasury Department stated that it had concerns about Switzerland’s currency practices, and suggested the nation had ‘markedly’ increased foreign exchange purchases since the middle of 2019.
In recent years, the Swiss National Bank has intervened in currency markets, buying foreign currencies to ease demand for the Franc. The Swiss Franc, or Swissie, is seen as a safe-haven asset, meaning in times of geopolitical tensions or uncertainty, markets tend to seek it out, causing it to rise. Another currency with a similar safe-haven status is the Japanese Yen, and gold is another popular asset in times of crisis.
Chief Economist at the Geneva-based wealth management business, Indosuez Marie Owens-Thomsen said: ‘The only reason not to be bullish on Swissie is the SNB and if they intervene less–whether it’s because of the report or their own choice–the result is still the same. If the SNB doesn’t combat the trend, then the Swissie has to appreciate.’
The Swiss National Bank has said rebuffed claims that its interventions in the currency market are designed to give Switzerland a trading advantage, instead discussing the negative effects of a strong Franc on inflation in its export-reliant economy.
The Swiss Finance Ministry denied the US allegations on Tuesday; markets will wait to see if any further comments are made.