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The Swiss franc is one of five Major currencies. However, this isn't because of its trading volumes: USD/CHF accounts for just 4% of global foreign exchange volumes (less then than USD/GBP, USD/AUD or even the USD/CAD currency pairs).
Instead, the Swiss franc acts as a safe haven - a currency that investors turn to as a store of value rather than a source of capital appreciation at times of market turmoil. For example, the Swiss franc appreciated by 15% against the Dollar from 1.1964 on July 1st to 1.3779 on August 11th following the downgrade of the United States' credit rating by Standard & Poor's.
Switzerland's neutrality, stable political system and secretive banking system make Switzerland a popular destination for risk-averse investors. However, the currency's long standing ties to gold also explain its role as a store of value. Formerly, the Swiss National Bank (SNB) was required to redeem banknotes into gold on request. Until 1997, the Swiss constitution required that at least 40% of the currency be backed by gold reserves. Since, a constitutional amendment lowered the threshold to 25% and the bank's gold reserves have fallen. However, the Swiss franc maintains to this day a strong positive correlation with gold. When the price of gold rises, the Swiss franc is likely to appreciate in response.
The USD/CHF pair tested the resistance zone at around the 1.0110 level last week as the dollar strengthened on the back of better-than-expected economic data. Although the failure to breakthrough this barrier dragged prices back to the 0.9960/45 area ... More »
The USDCHF has moved down with the dollar today and in the process has moved to a low risk level at the 50% and 200 hour MA at 1.00528. Traders bought the first test against the level. The price moved above the 100 hour MA above (reached 1.00746). More »
USD/CHF extended Tuesday's strong move to the upside into Wednesday, with a move to 1.0141, which resulted in a break above resistance at the February 15 high. However, this breakout was not sustained, as the dollar weakened ahead of and after the ...and more » More »
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