The Swiss francs should continue to strengthen against a basket of other major currencies. Analysts at UBS Group AG, expect the common currency to continue outperforming other currencies as the country’s economy remains resilient even as coronavirus continues to rattle other economies around the world.
Switzerland Economy Resilience
Demand for the Switzerland currency has already clocked five-year highs as others continue to struggle at the backdrop of the coronavirus pandemic that has taken a toll on most economies. Switzerland’s economy is entering the economic recession season with excellent credit, unlike other countries. Similarly, the country’s health situation remains under control, even as coronavirus continues to cause havoc around the world.
Switzerland Francs CHF has so far remained resilient against the U.S Dollar with USD/CHF pair trading sideways even as the dollar continues to strengthen against other majors.
Swiss Francs Strengthening
In addition to trading sideways against the U.S Dollar, the Swiss franc continues to strengthen against the Euro, which is under immense pressure amidst weak economic data from the European Union. The Swiss francs have strengthened against the euro over the past year.
Conversely, the EUR/CHF rate has dropped from highs of 1.144 at the start of 2019 to current lows of 1.05, affirming Swiss franc’s strength. The Swiss National Bank has had to step into action in recent months to prevent further strengthening of the francs against the Euro. Conversely, the central bank did sell more francs into the forex market as a way of trying to push back on further appreciation of the francs.
The Central bank is trying to avert a situation where the franc appreciates against the Euro to the 1.03 level as it could have a negative impact on the country’s export business. A decline in Switzerland tourism, as well as export industries, should avert further strengthening of the Swiss francs, which could be bad for business amidst the current turmoil in the global scene.
However, analysts at UBS have raised concerns about the further weakening of the euro, which could take a toll on the Swiss francs. The analysts have since called for hedging of exposure on the common currency.