You probably have heard of the popularity of Swiss bank accounts as offshore savings accounts for investors. Switzerland is well-known for being a neutral territory. It’s the global destination of choice for investors looking to keep capital outside of their own countries, and relies heavily on the banking sector to support its economy. Likewise, Switzerland’s neutrality plays a large part in its currency value.
1. The Swiss franc is considered a safe haven currency
The Swiss franc tends to appreciate during times of economic and political instability, earning its status as a “safe haven” currency. In times of uncertainty, the franc also provides a stable alternative to the euro, dollar or British pound. In 2011, the Swiss National Bank, the central bank behind the Swiss franc, began an active policy in the currency market to cut interest rates and prevent overinflation of the franc.
2. The Swiss National Bank controls their inflation rate
The Swiss National Bank targets a consistent inflation rate of around 2%. Additionally, if the economy takes a downturn, the bank does not typically create monetary policies with the intention of stimulation. This fits in with the long-term reputation of Switzerland for conservative economic policies.
3. Switzerland maintains independence and neutrality
While Switzerland often chooses to follow similar policies of other European countries, it still maintains a clear independence. In many ways, the Swiss franc is impervious to economic conditions; unlike other currencies, such as the American dollar.
Sometimes it appears the only influence on the Swiss franc that really matters are the influence rate decisions given by the Swiss National Bank. This may be in part because the Swiss governments are fairly consistent regarding their economic policies. Or because the Swiss franc’s position as a stable, liquid and reliable currency makes it a popular choice for traders.
