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The Swiss Franc (CHF) is the official currency of Switzerland and Liechtenstein. It is also sometimes informally referred to as the “Swissie” by traders.

Swiss franc also has a strong link with gold. When gold goes up, CHF goes up. When gold goes down, CHF goes down. The reason why the Swiss franc (CHF) moves along with gold is because more than 25% of Switzerland’s money is backed by gold reserves.

Swiss National Bank

The Swiss National Bank (SNB) was created in 1907 and granted a monopoly on issuing banknotes in 1910. In 1930, it joined the Bank of International Settlements (BIS).

The SNB is different from most other central banks in that it is a “special statute joint-stock company”. Its share capital is CHF250,000. This is divided into 100,000 registered shares such that each one carries a nominal value of CHF250. SNB shares are listed on the Swiss stock exchange. Shareholders can receive dividends, but these are capped at 6%. In 2017, the public sector held 76.36% of SNB shares while private owners accounted for 23.64%.

What moves CHF?

I. SNB Monetary Policy

The SNB fulfills maintains the price stability of the country. The inflation target is not an absolute number but a band with an upper and lower bound. The central bank uses policy instruments such as interest rate hikes and cuts to achieve their price growth objective. It also holds press conferences where markets can approximate the direction of interest rates based on hawkish or dovish rhetoric from SNB officials.

II. Regional Political Risk

As the Eurozone debt crisis emerged with initial turmoil in Greece in 2011, traders started buying up the Swiss Franc as a regional alternative to the Euro. Switzerland is an export-driven economy, so the stronger Swissie amounted to a headwind for economic growth. It also undermined the effort to banish crisis-era deflation. To counter this, the SNB decided in 2011 to put a floor on EUR/CHF at 1.20. When EUR/CHF threatened to dip below this exchange rate, the bank would weaken the Swiss unit by selling it on the open market. This lasted through early 2015.

On January 15,