Swiss franc lures global investors

The Swiss franc is being favoured by global investors over other currencies, according to the new report swissinfo.ch

The Swiss franc is continuing to enjoy its growing status as a safe haven for foreign investors, according to a report by Swiss banking giant Credit Suisse.

On Friday, the franc closed at SFr1.5204 against the US dollar, close to its two-and-a-half-year high. In February, a dollar cost around SFr1.70.

“The Swiss franc is regarded as a major safe haven instrument and what we have seen, especially after September 11, is that a lot of risk-averse investors went into the Swiss franc and this suddenly has pushed the Swiss franc up,” Thomas Traut, a senior strategist at Credit Suisse, told swissinfo.

Much of the franc’s popularity can be attributed to Switzerland’s growing competitiveness, low interest rates and political stability, says the country’s second biggest bank. It adds that the recent economic downturn has also worked to Switzerland’s advantage.

Nannette Hechler-Fayd’Herbe, the report’s author and head of Swiss Fixed Income Research at Credit Suisse, says the Swiss franc and Swiss assets have further benefited as equity and bond markets tumbled following a series of high-profile bankruptcies in the US, including the energy giant Enron.

Flexible labour market

Hechler-Fayd’Herbe adds that other factors such as low interest rates and a flexible labour market are also expected to encourage investors to assign higher weightings to Swiss franc assets in their portfolios.

The report points out that the Swiss National Bank’s “independent and credible” monetary policy means it can support the Swiss economy efficiently, as well as preserve the Swiss interest rate bonus.

“The Swiss National Bank has an advantage in its lean structure, which allows it to act swiftly and thereby support the Swiss economy efficiently,” says Hechler-Fayd’Herbe.

Swiss exports have proved to be competitive in recent years despite the strength of the Swiss franc – another factor working to seduce foreign investors.

The stable Swiss political system also means that economic policies are generally “long-term in nature and not dependent on electoral cycles”.

The report concludes that the professionalism of Swiss markets measures up to international standards and ensures its competitiveness.

“We think that the Swiss franc will continue to be a strong currency,” says Thomas Traut. “We expect that the Swiss franc will continue to appreciate versus the euro, although we foresee for the next few months a weakening versus the euro to levels of probably SFr1.50, but thereafter another strengthening of the Swiss franc.”

swissinfo