subject: The secret of the Swiss Franc [print this page] The secret of the Swiss Franc The secret of the Swiss Franc
The Swiss Franc has beenoutperformingall othermajor currencies in the past weeks/months. The main reason behind this appreciationis mainly due to the intriguing country behind this currency (switzerland) which has been playing the roleof "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 secrecyhas largely contributed to such facts, in addition toSwiss 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 anaccount, or the cash balance involved. The system is so strictthat any lift of the banking secrecyon 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 dollarhas lost its status as the mostimportantsafe haven currencyintimes of crisis. In fact ithas been depreciatingagainst all major currencies andcommodities, reaching all time highs against gold, silver, the Canadian dollar and the Swiss Franc.
It is true thata strong currency puts the Swiss economy in a betterposition 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 anycountry to have a strong currency, will remain a question of balance. What we have seen over the years suggestsclearly that currency prices abide by a cyclical pattern where extreme prices are unlikely to be sustainedfor long.
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