The secret of the Swiss Franc

The Swiss Franc has been outperforming all other major currencies in the past weeks/months. The main reason behind this appreciation is mainly due to the intriguing country behind this currency (switzerland) which has been playing the role of "safe deposit" of the world for several decades. It is believed that more than 30% of the world's wealth is deposited at Swiss Banks, a country with only 6.5 million citizens but also with more than 500 operational banks and major financial institutions. The famous Swiss banking secrecy has largely contributed to such facts, in addition to Swiss banks which have recently proved to be "facilitators" for the opening and funding of big offshore accounts in Switzerland for non-Swiss citizens and residents. 

The Swiss banking secrecy is a Swiss law ratified by the Swiss parliament. It prohibits the disclosure of any information related to Swiss bank accounts, whether it is the identity of a client, the nature of an account, or the cash balance involved. The system is so strict that any lift of the banking secrecy on any Swiss account would require a judgment from a Swiss judge in a Swiss tribunal.

Recent Geopolitical events, especially in the Middle East and North Africa have also suggested that the US dollar has lost its status as the most important safe haven currency in times of crisis. In fact it has been depreciating against all major currencies and commodities, reaching all time highs against gold, silver, the Canadian dollar and the Swiss Franc.

It is true that a strong currency puts the Swiss economy in a better position to cope with rising inflation, mainly generated from high oil prices and commodities, but this appreciation of the Swiss Franc comes to a high price: the industry. In fact Mr. Amman the Swiss minister of the economy has reiterated on several occasions that measures will be taken to protect the Swiss industry which is going to see it's export prices rising phenomenonly in the coming months.

Whether it is good or bad for any country to have a strong currency, will remain a question of balance. What we have seen over the years suggests clearly that currency prices abide by a cyclical pattern where extreme prices are unlikely to be sustained for long.