The Swiss franc continued its strong downward trend as its safe-haven appeal among investors grew. The USD/CHF exchange rate has tumbled in the last three consecutive days, and is now hovering at its lowest level since September 2011. Here are some of the reasons why the Swiss franc is seen as a better alternative to the US dollar.
Switzerland is a neutral country on most global issues
The main reason why investors see the Swiss franc as a safe haven is that Switzerland is a neutral country on so many issues. It is one of the top European countries that is not a NATO member.
Therefore, this means it is not obligated to boost its defense spending as other NATO members. Also, its neutrality means that it is never at risk of an attack by European, Middle Eastern, and Asian countries.
The only recent time when the country took sides and implemented sanctions was during the Russian and Ukrainian crisis. At the time, Switzerland took the side of Russia and implemented sanctions against several officials.
Swiss stance is much different from that of the United States, which is entangled in global conflicts. The US is involved in the Americas, Asian, and European crises, a situation that has contributed to its substantial debt burden. For example, the country spent over $7 trillion in the war in Afghanistan.
Switzerland has a strong economy
The USD/CHF exchange rate has also plunged because of the economy’s strength. Recent data shows that Switzerland has a GDP of over $884 billion and just $140 billion in total public debt.
In contrast, the US has a public debt of over $36.5 trillion against a GDP of over $27.7 trillion. Worse, the public balance debt is expected to keep growing in the coming years as Donald Trump’s budget deal calls for $4.5 trillion.
On top of all this, the Swiss National Bank has over $800 billion in assets, meaning that its net debt is insignificant. For example, the bank is the tenth biggest holder of American treasuries.
Read more: USD/CHF analysis: Here’s why the Swiss franc is soaring
The Swiss economy is doing well
The USD/CHF pair has also plunged because of the ongoing strength of the Swiss economy. Data shows that the economy expanded by 0.8% in 2024, lower than the previous year’s growth of 1.2%.
Analysts expect the economy to grow by 1.4% this year and 1.6% in the coming year. While this is still a strong economic growth, it is lower than the previous estimate. The main reason for the decline is the recent tariffs by Donald Trump and the strong Swiss franc.
A strong Swiss franc hurts the economy by making its exports more expensive than in other countries.
What next for the USD/CHF exchange rate?
The weekly chart shows that the USD to CHF exchange rate has plunged in the past few months. This decline happened after it formed a triple-top chart pattern at 0.9215. This pattern’s neckline is at 0.8336.
The pair has moved below the 50-week and 100-week moving averages, a sign that bears are in control. It also moved below the neckline at 0.8335, its lowest swing in 2024.
The distance between the triple-top and the neckline is about 9.5%. Therefore, measuring that same distance from the neckline brings the USD/CHF target to 0.7534. A move above the neckline at 0.8337 will invalidate the bearish view.
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