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Swiss Franc Gains on Record Trade Surplus in 2019

January 29, 2020 at 17:24 by Andrew Moran

1,000 and 100 francs billsThe Swiss franc is strengthening against several currency rivals midweek as the country recorded its highest ever trade surplus in 2019. The latest data may give the central bank a headache as it attempts to justify its depreciating efforts after accusations of being a currency manipulator. With chaos in global financial markets, will investors continue to pour into the traditional safe-haven asset?

According to the Federal Customs Administration, Switzerland’s trade surplus slipped to $2.5 billion in December, down from $2.36 billion in November as exports declined for the third consecutive month. While pharmaceuticals, chemicals, and automobiles led the drop, there were improvements in sales of machines, electronics, precision instruments, and metals. Imports edged up as the nation increased purchases of pharmaceuticals, chemicals, vehicles, and energy.

On a non seasonally adjusted basis, Switzerland posted its best trade surplus ever last year. The Swiss customs office reported a trade surplus of $38.55 billion, driven by a 3.9% annual jump in exports to $248.69 billion. Chemical and pharmaceutical exports helped the overall trade surplus.

This week, the Swiss franc is now trading at its best level since April 2017, which could place the Swiss National Bank (SNB) in between a rock and a hard place. On one hand, the central bank is trying to purposely weaken the franc to boost exports by increasing its foreign reserve purchases. On the other, the SNB will continue to try convincing the Treasury Department that its subzero interest rates and interventions are not tactics to manipulate the currency to give itself an unfair advantage in the global trade market.

Earlier this month, the Treasury added Switzerland to its watch list of possible currency manipulators. U.S. officials had cited the nation’s immense bilateral goods trade surplus and its giant current account surplus. For now, experts agree that the central bank will not abandon its policy directives.

In other data, the Swiss investor sentiment index slumped 4.2 points to 8.3 in January and the assessment of current economic conditions rose from 8.3 points in December to 29.2 this month.

The USD/CHF currency pair rose 0.17% to 0.9746, from an opening of 0.9731, at 16:07 GMT on Wednesday. The EUR/CHF fell 0.04% to 1.0722, from an opening of 1.0725.

If you have any questions, comments, or opinions regarding the Swiss Franc, feel free to post them using the commentary form below.

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