Switzerland is known as a place of stability. One impressive example of this is that the 10-centime coins minted in 1879 have been in circulation for more than 140 years. The coin has made it into the GUINNESS WORLD RECORDS™ as the world’s ‘oldest coin still in circulation’.

Switzerland has one of the most solid currencies in the world, namely the franc. No other currency has retained its value so well since the outbreak of the First World War. Nor has any other country kept average inflation lower than Switzerland.

Why has the Swiss franc strengthened in the last 15 years?

The appreciation of the Swiss franc over the past 15 years is due to two special characteristics of Switzerland.

The first is the fact that interest rates in Switzerland often tend to be lower than elsewhere. This is due among other things to Switzerland’s traditionally low inflation as well as its political and economic stability. Following the global financial crisis in 2008, many central banks significantly lowered interest rates, which decreased the interest rate differential between Switzerland and other countries. This in turn made the Swiss franc more attractive.

The second is the Swiss franc’s reputation as a safe haven, particularly in times of high uncertainty worldwide, as for instance following the global financial crisis or the European debt crisis, when the Swiss currency gained significantly in value. So some investors are prepared to hold Swiss francs although the returns are lower than on other currencies.

There was significant turmoil in the period following 2020 as well, when the coronavirus pandemic and the Russian attack on Ukraine led to increased uncertainty and renewed appreciation pressure on the Swiss franc.

Why did the franc appreciate against the euro and the US dollar from 2021 to 2023?

In the first phase of the coronavirus pandemic, until the beginning of 2021, inflation was at a low level internationally. Prices began to rise in many countries from mid-2021. This development was mainly driven by bottlenecks in the supply of goods and by the rise in energy prices caused by the outbreak of the war in Ukraine in early 2022.

When the increased price pressure became apparent in other countries from mid-2021, the SNB allowed the Swiss franc to appreciate to a certain degree in order to limit imported inflation. This appreciation made imports cheaper and thus counteracted inflation in Switzerland.

However, since prices rose significantly more sharply during 2021 and 2022 outside Switzerland than within its borders, the so-called ‘real’ appreciation of the franc – appreciation corrected for inflation – was in fact less pronounced during that period. 

Thus, although exporters received less money, when converted into Swiss francs, for the products they sold abroad, the strong inflation outside Switzerland allowed them at the same time to charge higher prices. As a result, our economy was better able to deal with a franc that was stronger in nominal terms.

Although Swiss residents travelling in Europe did receive more euros for their francs, the high inflation abroad meant that their purchasing power had been reduced.

The real exchange rate of the Swiss franc thus changed significantly less strongly.