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Swiss Franc tends to gain during the economic turmoil as people tend to go for safer investments. During 2009 to 2012, the Swiss currency has seen some major moves. Here we shall see what factors have caused the heavy moves and what we can expect during 2013.

During the last three quarters of 2009, EUR/CHF had always been averaging over 1.5000 mark. From middle of December 2009, the Swiss Franc had started appreciating against the Euro and during August 2011 it had reached the low of 1.0070, i.e. an appreciation of approximately 35% from the level of 2009. USD/CHF was 1.1912 during the middle of March 2009 and after a drop to 0.9912 during November 2009 the currency pair had recovered again to 1.1731 by the end of May 2010. The subsequent drop from there saw a low of 0.7069 by the beginning of August 2011, i.e. an appreciation of approximately 40% against the U.S. Dollar since May 2010.

(click to enlarge)EUR/CHF

The drastic appreciation of Swiss Franc was a grave danger to Swiss economy because Swiss economy is heavily dependent on exports.

Switzerland Exports and Imports:

1) Exports amount to 50% of the GDP of Switzerland and out of that nearly 60% exports are to Eurozone. The main trading partners for Swiss exports are as follows:

· Germany: 19.2%

· U.S.: 10.2%

· Italy: 7.9%

· France: 7.7%

· U.K.: 5.9%

(click to enlarge)Swiss exports

Swiss Intervention:

The drastic appreciation of Swiss Franc had made Swiss National Bank (SNB) to intervene during September 2011, whereby SNB announced that they will not tolerate EUR/CHF to go below the exchange rate of 1.20. SNB had announced to go for unlimited buying of Euro to maintain that rate. Since then the EUR/CHF had gone as high as 1.2473 by middle of October 2011 and then settled down in the narrow range between 1.2000 and 1.2184 except on occasion when it had touched 1.1997.

Swiss Franc also depreciated against U.S. Dollar and USD/CHF had gone as high as 0.9972 during July 2012 before the bearish pressure came into the picture ahead of the psychological level of parity.

Switzerland Foreign Exchange Reserves:

The result of Switzerland National Bank's intervention to devalue the currency was a huge jump in the Swiss Foreign exchange reserves, and by 2012 end, Switzerland became the country with 4th largest foreign exchange reserves in the world.

The table below shows some of the countries with the highest foreign exchange reserves. The data mainly shows the Forex reserves in convertible foreign currencies. Data sources are International Monetary Fund, Central Intelligence Agency and

CountryDuring Q4-2000 and Q1-2001Dec. 05During the end of 2012 (or the latest available figures)% Growth from 2000% Growth from 2005

The Graphical representation of the Foreign exchange reserves:

(click to enlarge)

The graphical representation of the growth of Foreign exchange reserves except China:

(click to enlarge)Foreign exchange reserves growth

Note: China is excluded in the above graph because the drastic increase in the Forex reserves in China makes the other bars in the chart to disappear because of the limitation of the height of the chart.

Switzerland - Current Economic and fundamental facts:

Swiss Exports in a healthy shape

Swiss monthly exports levels were frequently falling below 1600 Million Swiss Francs when the currency was appreciating during 2009 to mid-August 2011. The following chart shows that since August 2011 the monthly exports are consistently above that mark with the exception of May 2012 when there was a slight drop to 15926.5 Million Swiss Francs.

(click to enlarge)Swiss exports growth

Unexpected growth of population

There has been an unexpected rise in the population of Switzerland which had crossed 8 Million mark by the end of the 3rd quarter of 2012. This includes 1.85 Million, i.e. over 23% foreigners. Year 1999 estimates by Bundesamt für Statistik (BFS) were for a population growth to a peak of 7.4 Million by the year 2030 followed by a decline. The same were revised in 2005 when it was estimated that the population growth would continue till 2035. The rapid growth in the numbers which Switzerland has seen in past 5 years is mainly due to continuous immigration of foreigners and this suggests that the population would cross 10 Million Mark by 2031.

The effects of rapid population growth:

On one hand the unplanned growth has negative effects as the growth in infrastructure may not be able to cope with it. It also puts more burden on government's outflows for public benefits. However, on the other hand, it increases the consumer spending and puts more money in rotation to help the economy. The increase in skilled manpower also goes in favor of nation building by faster developments and innovation.

Unemployment Rate

The unemployment rate in Switzerland has been quite lower than the Eurozone as well as the U.S. The last quarter of 2012 saw an unemployment rate of 11.70% in Eurozone. The unemployment rate during the same time in the U.S. has been 7.7%. In comparison, Switzerland's unemployment of 3.1% indicates quite a healthy picture of the economy.

Swiss Franc - What To Expect

The high dependency of Swiss exports on Eurozone makes the Swiss Franc's strength depend on the strength of Euro to a great extent. There has been some improvement in the previous strong bearish sentiments about Euro even though the underlying fears have not completely diminished. Another fall for Euro cannot be ignored, but before that some further upward consolidation is surely expected. Apart from this, as mentioned above, the unemployment situation and even the export levels remain in control in Switzerland. The inflation forecasts also do not indicate any risk of serious upward gains. Considering all these our view of Swiss Franc pairs is as follows:


Considering the above mentioned facts and the overall fundamentals of Switzerland economy, we expect some more strength in the Swiss Franc against U.S. Dollar. In the mid to longer term, if resistance near 0.9500 level holds and a break below 0.9000 psychological level takes place, then USD/CHF may see some more downward moves first towards 0.8930 and then possibly 0.8840. As far as slightly longer-term outlook is concerned, considering the overall situations in Eurozone and the underlying sentiments associated with that, the Euro honeymoon is not expected to last very long. With that in mind subsequently an appreciation of USD/CHF cannot be ignored towards 0.9740 or more.


Swiss National Bank's set floor for EUR/CHF for 1.2000 level does not seem to have any immediate threats. Considering the size of economy, SNB's intervention for the forex rates would always be more effective than in any other country like Japan. This makes the lower limit for the short term to medium term as 1.2000 for EUR/CHF. We do not expect any strong bullish sentiments for Eurozone but some more upward correction in Euro valuation is expected. That would give Euro relatively a better edge against the Swiss Franc in the mid-term. Considering this, we expect EUR/CHF to have some more appreciation in next few months, first toward 1.2360 and then possibly 1.2440.


In the coming months, we expect some more weakness in GBP/CHF. Even though, because of frequently changing sentiments, some volatile moves below 1.5160 cannot be ignored, but overall we would expect some weakening toward 1.4600 in the coming months.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: These views are the views of the author and should not be taken as an investment advice. The author has put in all possible efforts to validate the correctness of the data provided but Seeking Alpha cannot take any responsibilities of any mistakes.