USD/CHF: What it is, How it Works, Recent History

What Is USD/CHF (U.S. Dollar/Swiss Franc)?

USD/CHF is the currency pair of the U.S. dollar and Swiss franc. The currency pair shows how many Swiss francs (the quote currency) are needed to purchase one U.S. dollar (the base currency). Trading the USD/CHF currency pair is also known as trading the "Swissie."

Understanding USD/CHF (U.S. Dollar/Swiss Franc)

CHF is the unique currency code for the Swiss franc, and USD is the currency code for the U.S. dollar. Currencies are quoted in pairs, revealing how much of one currency it costs to buy the other.

The value of the USD/CHF is how many francs it takes to buy one USD. For example, if the pair is trading at 1.05 it means that it takes 1.05 Swiss francs to buy one U.S. dollar. If the rate is 0.9850, that means it takes 0.9850 francs to buy one USD.

The USD/CHF is affected by factors that influence the value of the U.S. dollar or the Swiss franc in relation to each other and other currencies. Employment data and gross domestic product (GDP), from both countries, are a couple of the economic indicators that have a significant impact on the currency pair.

The interest rate differential between the Federal Reserve (Fed) and the Swiss National Bank (SNB) will also affect this currency pair. For example, when the Fed intervenes in open market operations to make the U.S. dollar stronger, the value of the USD/CHF could increase, due to a strengthening of the U.S. dollar when compared to the Swiss franc.

On the other hand, if the Swiss National Bank raises interest rates, that could lure more investors to the franc and thus increase its value. In this case, the USD/CHF rate would fall because it will take fewer francs to buy the USD.

The USD/CHF tends to have a negative correlation with the EUR/USD (euro/USD) and GBP/USD (British pound/USD) currency pairs. This is due to the positive correlation of the euro, Swiss franc, and the British pound.

Recent Price History of USD/CHF

The Swiss franc is a safe haven currency, meaning in times of global economic stress or high volatility the franc will often appreciate. The Swiss franc and Japanese yen are considered the two most popular safe-haven currency trades. This is because Switzerland is largely regarded as stable financially and politically.

During the early stages of the Great Recession, the Swiss franc appreciated against all major trading partners apart from the Japanese yen. Between the start of 2007 and mid-2008 the USD fell against the CHF, although as the selling in the U.S. stock market escalated in late 2008, more investors started flowing back into the USD, viewing it as a relatively safer bet than the CHF.

After 2009, the USD once again declined against the CHF, with the pair continuing to drop into the 2011 low at 0.7066. After that, the USD gained upside momentum and the pair has traded between 0.83 and 1.0344 between 2012 and 2021.

In 2015, the USD/CHF was trading near 1.20 when the SNB pulled the floor they had set on theEUR/CHF pair. The EUR/CHF plunged, as did the USD/CHF to 0.83. The rapid plunge caused massive upheaval in the currency markets as many global forex brokers went bankrupt or required a bailout because of trader losses. The incident caused widespread reform, mainly the lowering of leverage available in many countries.

Interpreting USD/CHF Price Fluctuations

If the rate of the USD/CHF is 0.90 and the rates moves up to 1.05, then the USD has appreciated against the CHF because it now costs more CHF to buy one USD.

On the other hand, if the rate falls from 1.03 to 0.99, it now costs fewer CHF to buy one USD, so the CHF has appreciated or the USD has fallen relative to the CHF.

The USD/CHF rate shows how many CHF it takes to buy one USD, but a traveler heading to Switzerland may want to know how many U.S. dollars it takes to buy one CHF. This requires knowing the CHF/USD rate (codes are flipped). To get the CHF/USD rate, divide one by the USD/CHF rate.

For example, if the USD/CHF rate is 0.9350, to get the CHF/USD rate divide one by 0.9350. The result is a CHF/USD rate of 1.0695. This rate lets the traveler know that it costs US$1.0695 to buy one CHF. This makes sense because we know from the USD/CHF rate that the CHF was more valuable than the USD because it costs less than one franc to buy a dollar.

Keep in mind when traveling or when getting physical currency, banks and currency exchange houses will typically charge 3 to 5 percent and will work this into the price of the currency. Therefore, our traveler heading to Switzerland likely won't get the real-time forex market rate of US$1.0695 for each CHF (equivalent to USD/CHF rate of 0.9350). Instead, the currency exchange will likely charge an extra 4%, for example, bringing the rate to US$1.1123 for each CHF instead of $1.0695.