In this article, we look at the development of the CHF against the EUR in 2024. After three years of appreciation, the franc fell quite sharply in 2024. In view of the stock market correction that has just begun, a renewed appreciation of the CHF is likely. However, we think that this will only weigh on the euro in the medium term.
After several years of strong appreciation, the franc has started this year with a rather strong and, for many, completely unexpected depreciation. The highest rate was EUR/CHF 0.9250 on 29.12.2023 and the lowest value this year was EUR/CHF 0.9915.
A devaluation of almost 7% in such a short space of time is almost a shock, when the franc usually moves in an orderly fashion.
The franc is currently back at 0.9550 EUR/CHF and thus right in the middle of this fluctuation range.
The Swiss franc reacts differently to other currencies
If the stock markets are strong, the franc, like the Japanese yen, is used as a “credit currency” for speculative stock market investments. It offers a very low interest rate (compared to the expected returns), as does the JPY.
However, if the stock market climate turns, these speculative loans are quickly covered and demand for CHF soars, causing the currency to rise rapidly. We could be witnessing the beginning of such a development.
The USD also often reacts as a safe haven currency during stock market crises, but often also loses value against the CHF and JPY in these situations.
What happens in the event of another risk-on?
I assume that we are currently only facing a medium correction on the stock markets, which will eliminate an extreme exaggeration (correction 15-25%). I do not yet see the conditions for a crash (stock market losses of the indices > 30%) as given and therefore I also see good chances for a subsequent recovery, the causes of which would require a broader description and have no room here.
- New risk-on in the second half of the year.
What is happening in the wake of the US election?
No matter how the elections go and how they turn out. The USD is at least as overvalued against the rest of the world as the US stock markets are today. It is very likely that we will see a significantly weaker USD in the coming year. If this happens, it will have:
CONSEQUENCES FOR THE FRANC
The following chart shows the comparative development of EUR/USD and EUR/CHF. The USD swings somewhat more strongly, but has been the price-determining factor for the EUR/CHF trend over the last 9 years. I assume that in the course of a more significant devaluation of the USD, which is only a matter of time and could be expected especially under a President Trump. As there is no indication that the Swiss National Bank will stop supporting its economy, I assume that a depreciation of the USD will be managed in such a way that these Swiss exports to the USD area will be mitigated by allowing the franc to depreciate against the euro.
It is hardly conceivable that the SNB would remain inactive if the USD were to depreciate significantly and the franc were in danger of remaining hard against the euro or even appreciating.
