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USD-CHF



USD-CHF

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USD-CHF currency pair is often called ‘The Swissie‘. The Swiss Franc is the last Franc still in issuance in Europe. CHF is shorthand for ‘Confoederatio Helvetica’ Franc, and represents the economy of the neutral nation situation in the center of Europe. Switzerland has long been a key banking center for customers around the world, and the secrecy with which they maintain their banking operations has made them one of the more desireable locations for storing cash. This has helped to bring considerable strength to the Swiss Franc, pressuring exporters from the nation. When the European Debt Crisis enveloped the continent, massive inflows into Swiss Francs made the situation worse until eventually the Swiss National Bank (SNB) created a peg to the Euro at a rate of 1.2 Swiss Francs for every 1 Euro. If the EURCHF currency pair fell below 1.20, the SNB proposed to sell CHF and buy EUR to support the 1.20 floor.

Trading the U.S. Dollar/Swiss Franc USD-CHF


Although it is somewhat less liquid than the euro and the pound, the Swiss franc is still a very easy currency for forex traders to trade. The issue most likely to result in big movements in the Swiss franc is international political and/or economic instability. When either political or economic turmoil increases, investors will flee to the safety of the Swiss franc. When volatility decreases, however, the Swiss franc will see less interest from traders and investors.

Though the franc often rises against most other currencies during times of increased volatility, forecasting the relative performance of the Swiss franc versus the U.S. dollar is difficult, since the U.S. dollar is also seen as a safe haven during times of turmoil. Therefore, it is not always easy to figure out whether the Swiss franc or the U.S. dollar will be the predominant source of safety during an international crisis.

During less volatile periods, traders should keep in mind that the Swiss franc has a very high correlation to the euro. When the value of the euro increases, the franc will usually follow suit. If you notice a rise or decline in the euro without a corresponding move in the franc, you may want to consider initiating a trade believing that the franc will eventually continue its historical correlation with the euro. Keep in mind, however, that although this type of relative value trade is extremely popular (and often profitable), there is no guarantee that markets will revert to their historical mean, so don’t put yourself in a position to get caught holding the bag (To learn about another popular pair that includes the “Swissie”, see Making Sense Of The Euro/Swiss Franc Relationship.)

USD-CHF

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