- The Swiss franc continues to appreciate.
- The euro traded below par on Thursday and cost CHF 0.997.
- The currency pair is now trading above the important parity mark again.
- On Wednesday, the euro fell below the parity mark for the first time since March.
The EUR/CHF pair fell relatively clear below parity on Thursday afternoon, marking a new year’s low at 0.99435. In the meantime, however, the pair is trading above the psychologically important mark again at 1.0012. The Swiss franc also appreciated slightly against the dollar and was traded at 0.9566 (USD/CHF).
After the Swiss National Bank surprisingly hiked interest rates two weeks ago and no longer described the franc as high, market participants said it was only a matter of time before the euro fell below the parity mark against the franc.
“As long as the European Central Bank reacts at a snail’s pace to the high inflation rates, the franc will continue to appreciate,” said a comment by VP Bank on Wednesday. This is particularly evident on trading days with pronounced risk aversion. “It is true that a rapid march to levels of 0.90 cannot be assumed. But prices below parity will probably become the norm.”
According to a recent study by CS, the SNB could also soon end its foreign exchange purchases, which have helped to ease the appreciation pressure on the Swiss franc. Because after more than a decade of almost exclusively unilateral interventions in the foreign exchange market, the inflation outlook no longer allows for a significant depreciation of the Swiss franc, experts wrote on Wednesday.
Assessment by SRF business editor Matthias Pfander
A look at the price tables with the foreign currencies today may cause astonishment. The euro rate has moved well below parity, i.e. below 1 franc. For a long time, reaching or falling below this limit was considered dangerous. That is no longer the case today. In its last assessment of the situation, the Swiss National Bank no longer described the Swiss franc as highly valued. So it allows the price to move below parity.
That was different until recently. In the first quarter, the National Bank intervened massively to weaken the Swiss franc, buying CHF 5.7 billion in foreign currency. In the previous quarter, the intervention amounted to 12.6 billion. The current price close to or below parity even offers advantages at the moment. It helps to curb imported inflation and makes the upcoming summer holidays in other euro countries cheaper. And when it comes to exports, the National Bank apparently believes that Swiss companies are capable of living with this course.