Swiss Franc stumbles as Ruble hits rough path

Turmoil on currency and stock market

The CHF/EUR exchange rate has fallen to its lowest point since January 2015. On Friday, April the 13th, it stood at 0.8429 euros, on Monday it fell even further, by 0.08% to 0.8422 euros. In comparison, the other currency considered as so-called safe haven – the Japanese Yen – has gained. The EUR/USD exchange rate remained stable at 1.2335 dollars. The index dollar itself – as measured against the six most popular currencies – was steadily at 89.781. The real havoc happened on Russian market. The Russian Ruble was 0.36 percent down against the US Dollar, hitting 62.67 Rubel per dollars, whereas against the Euro it was weaker by 0.37 percent, standing at the level of 76.80 Rubel per euro. The Russian’s dollar denominated index, RTS, was down by as much as 0.57 percent to 1,098.26 points. The Ruble-based index, MOEX, fell by 0.18 percent to 2,171.28 points. Also shares on Russian stocks were significantly down and lower prices for oil was recorded. Benchmark Brent crude oil went down by 1.58 percent to 71.43 dollars per barrel.

What impacted the selloff of the  Swiss Franc?

The difficult situation of Russian Ruble was impacted by political issues. United States imposed sanctions on Russian tycoons and some of the biggest companies controlled over by Putin’s powerful friends. It was a result of Russian chemical attack on ex-spy on the territory of Great Britain, as well as supporting with chemical weapon a Syrian dictator or cyberattacks launched to manipulate the presidential elections in US, that vastly aided Trump’s win. Even though the price of oil had been raising, the political factors turned out to have much stronger impacts on the Russian currency and stock market. What is has to do with the Swiss Franc exchange rate though? Turns out – a lot. The Swiss Franc is significantly driven by capital flows. Russia sanctions covered some of Swiss companies in which Russian are investing. There was an increased need for liquidity by Russian investors and that combined with investors eager to sell Swiss Francs rather than left their capital in the country resulted in change of CHF currency situation. The risk factor played also a huge role.

Is Swiss Franc losing its safe haven status?

The recent situation and unearthed correlations between Ruble’s selloff and investors’ decision to sell Swiss Francs has shown that the Swiss currency might be losing its safe haven charm. As its exchange rate against the US dollar or the Euro was falling, the yen was getting stronger. On Wednesday, April the 11th, the Yen moved up in group of 10 other currencies, with Swiss Franc felling down – it was a day after US air strikes in Syria.  It looks like the Yen is establishing itself as the best safe haven currency on the market, whereas the Swiss Franc is losing its reliability. It is a result of Swiss National Bank policy of having a highly valued currency. The fact that such small, relatively, economy, like Switzerland’s gets in the middle of Russia and US sanction war is very risky for its currency. It highly influences the country’s status of safe and private place in terms of banking and financial matters.

What is ahead?

Syria’s war may influence currencies and market but not in long-term – at least for now. The Russian Ruble mainly managed to rebound on Friday, as pushed forward by oil prices hike. The European and US market will also revise the exchange rates probably very soon focusing on current matters and European Central Bank or FED’s policy. What will happen with Swiss Franc’s reputation as the safe haven? Only time will tell, but here damages from being tug in a geopolitical war between two biggest world powers might be longer lingering.