As gold and silver set new record highs day after day, roiling the asset market, the Swiss franc is quietly asserting a powerful presence in international finance. As trust in the U.S. dollar and the Japanese yen—long regarded as the standard-bearers of safe assets—wavers at the same time, global capital at a loss for where to go is rushing into Switzerland, seen as the last refuge among major-country currency options.
On the 29th in the international foreign exchange market, the Swiss franc showed a record rally reminiscent of the eurozone debt crisis in 2011. The franc appreciated about 12%–14% against the U.S. dollar over last year. It then jumped more than 3% further in just a month this year. As of the 28th, the dollar-franc rate in intraday trading fell to 0.7612 francs per dollar. It is the highest level in about 14 years and 5 months since Aug. 2011 (a rise in the value of the franc against the U.S. dollar).
Given that during the same period gold has surpassed $5,000 per ounce and silver has also entered record-high territory, the Swiss franc is being treated as the only currency asset standing shoulder to shoulder with the real assets of gold and silver. The Financial Times (FT) noted this as "a phenomenon that emerged as investors grew skeptical of the alternatives of the dollar and the yen."
Investors are especially enthusiastic about the Swiss franc thanks to Switzerland's political and fiscal stability. U.S. national liability hovers around 120% of gross domestic product (GDP), while the eurozone (the 20 countries that use the euro) averages around 90%. By contrast, Switzerland's general government liability ratio stays around 40%. Its current account has also long remained in surplus at 7%–10% of GDP, securing both fiscal and external soundness. This has increased confidence that the currency's value will not plunge even in crises.
Global investment banks MUFG and UBS said in recent reports that the Swiss franc is "currently the most powerful store-of-value currency on the planet." The Wall Street Journal (WSJ) reported that, rather than how much money is printed, the key factor determining currency value has become how trustworthy a country's system is.
In the past, the Swiss franc carried a strong image of secret accounts hiding illicit funds. But since 2018, as Switzerland began automatically exchanging financial account information with foreign tax authorities, hiding illegal funds as before has become virtually impossible. Even so, demand for francs is being driven not by dirty money but by high-quality institutional funds such as pension funds and sovereign wealth funds. In fact, Ontario's Investment Management Corporation of Ontario (IMCO), a major Canadian institutional investor, openly named the Swiss franc as an alternative destination after the dollar's value became unstable due to President Trump's policies. Pension & Investments, a pension-focused media outlet, assessed that this trend is not speculative retail demand but a strategic choice by the world's large asset owners and institutions.
Another reason money is flowing into the Swiss franc is that the Japanese yen, a traditional competitor among safe assets, is failing to play its role. Japan's national liability, approaching around 250% of GDP, and the side effects of prolonged ultra-low interest rates are eroding the belief in the foreign exchange market that the yen is a "risk-free asset." As the yen weakens, investors are reducing the yen share in their safe-asset portfolios and opting for the Swiss franc as an alternative, major outlets said. The Financial Times (FT) said, "As the yen's status as a safe asset wobbles, the Swiss franc has been left as effectively the only currency refuge available to global investors."
Given this situation, the Swiss Central Bank faces a deep dilemma. The stronger the franc gets, the more Swiss products lose price competitiveness, hurting exporters. Ultimately, a deflationary crisis could emerge. Switzerland's inflation rate is already stuck in the low 0% range. If the franc appreciates further, even the possibility of a return to deflation and negative rates is being discussed. Negative interest means commercial banks pay a custody fee, rather than receive interest, when they deposit money with the central bank.
Thomas Jordan, president of the Swiss National Bank (SNB), suggested the possibility of reintroducing negative rates, saying in a CNBC interview on the 28th that "franc strength is making currency policy operations very complicated." The SNB previously ran negative rates from Jan. 2015 to Sept. 2022.
However, experts predicted that unless the Trump administration's dollar policy path becomes clear and geopolitical risks subside, the Swiss franc's solo run is likely to continue for the time being. Generally, when a central bank cuts rates, it often leads to currency weakness. But in a country like Switzerland, where policy credibility is high, the central bank's proactive response itself can reinforce the franc's image as a safe asset.