The Swiss franc, considered a safe asset, is strengthening as Israel’s imminent deployment of ground warfare in Gaza is imminent due to the invasion of Palestinian militant Hamas. The Swiss franc recovered to its highest point in more than a year since September last year.
Analysts say that due to the geopolitical crisis in the Middle East, global investors include Swiss francs as well as U.S. government bonds and dollars in their safe asset portfolios.
According to the European Central Bank (ECB) on the 16th (local time), the Swiss franc and euro exchange rate is moving around 1.05 euros per Swiss franc on the same day. It is the first time since September last year that the Swiss franc and euro exchange rate soared to 1.05 euros per Swiss franc.
In September last year, the exchange rate seemed to be recovering to its high point again in more than a year, when the value of the Swiss franc against the euro hit an all-time high. At that time, the value of the euro fell as European Union countries feared that the energy crisis caused by the Ukraine crisis would intensify their economic difficulties. However, Switzerland, which has a high rate of renewable energy generation, is less hit by energy turmoil and inflation is relatively quiet, giving the Swiss franc a sense of safety.
The Swiss franc is highly valued compared to the U.S. dollar. The euro and dollar exchange rates remained around 1.05 dollars per euro on the same day, while the Swiss franc and dollar exchange rates are at 1.11 dollars per Swiss franc.
The Swiss franc’s strength is believed to reflect a preference for safe assets. It is diagnosed that global investors are also investing in Swiss francs as the need to build various safe asset portfolios grows. Since 2015, when the Swiss franc and the euro fixed exchange rate system were abolished, the price of one Swiss franc has been below one euro, but it became more expensive than one euro for the first time in history at the end of June last year and reached its highest point in three months.
Analysts say the Swiss franc’s strength is largely due to the worsening situation in the Middle East due to armed clashes between Israel and Hamas.
Switzerland’s adherence to a neutral diplomatic line is also reassuring investors. Amid concerns that an armed dispute could spread to neighboring countries, sentiment is spreading in the market to safely evaluate the Swiss currency that keeps a neutral diplomatic line.
Experts say that the Swiss franc’s strength in the Middle East may be short-term, but it is difficult to predict right away as it may last longer depending on the possibility of Israeli troops entering the ground war and responses from neighboring Arab countries.
