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All about: Swiss franc

All about: Swiss franc

Mr Fred Omulo Mr Fred Omulo

For a long time, the Swiss franc has been the most stable currency in Europe, maintaining its value during social and economic upheavals while other legal tenders experienced meltdowns. This article gives a brief description of its status.

Legal tender

The Swiss franc is the currency of Switzerland, Liechtenstein and Campione d’Italia in Italy. The currency is denoted as SFr and has the ISO code CHF that is used by financial institutions, especially those involved in the currency trade. The legal tender started circulation in 1848 after the Constitution vested the power to make money in the Swiss Federal Government. This ended many centuries of confusion caused by multiple authorities in various cantons issuing their currencies. Since that time, the franc has had gold as its reserve, even though the ratio of conversion has gradually dropped over the years to stand at 20
percent today. The Swiss franc has been a largely stable legal tender despite economic upheavals and this has given it a reputation of reliability. As a result, several countries maintain it as a reserve currency that supports their legal tender.

Safe haven

Over the years, the franc has also gained a reputation as a safe haven currency due to its reliability as a store of value that does not fluctuate. The main causes of this reputation include political and economic stability in Switzerland, a low inflation rate that stands at almost zero percent, backing from precious metals and long-term growth against other currencies, due to trade. The Swiss franc was recently in the business news (July 2011) as it fluctuated against a volatile US dollar (USD). The Swiss franc's exchange rate against the US currency improved in its favour as investors exchanged CHF to USD to avoid a possible backlash stemming from America’s debt crisis. Converting francs to dollars has been a one-sided loss as the US currency consistently loses value over the last 30 years. America has also suffered numerous economic slumps over that period, occasioned by inconsistent economic policies stemming from a divided political class.
Today, one CHF in USD terms costs 1.23047 after a decade long slump that saw the value hit an
all-time high of 1.82619 in October 2000 and a low of 0.70999 in August 2011.

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