Default Image

What scrapping the Swiss franc cap means for you

Earlier this month, the Swiss National Bank (SNB) made the shock move to abandon its cap on the Swiss franc. The cap had pegged the franc at a price of €1.2 since September 2011, making it a relatively safe bet for traders. Its removal changed all that, with the its worth soaring by 30% against the euro overnight. This was followed by panic on the Swiss stock exchange, gloomy predictions for its export market and confusion for individuals whose investments relied on the currency. But why did it happen, and what will the move really mean for you? 

Many traders suspected the decision was triggered by the European Central Bank's quantitative easing programme, which will decrease the value of the euro. There was also growing Swiss opposition to the SNB's tactic of minting new francs to buy euros, keeping the franc’s value down. Switzerland's foreign currency reserve was worth an enormous $480 billion at the last count, and the policy had led to inflation of an already strong housing market.

Now the cap has gone, buying or investing in Switzerland will be much more expensive – especially if you're spending in the euros. For that reason, it's little surprise that Swatch group chief executive, Nick Hayek, called the move "a tsunami; for the export industry and for tourism”.

For example, today, an Omega Seamaster men's watch would cost you around €5955. On 14 January 2015, it would've cost you €1000 less. In US dollars, that difference would've been around $600. The shift would still hit your bank balance, but not quite so hard. Like Swiss watches, Swiss holidays will also be a bigger investment, potentially putting off visitors. If you booked now, the price of a four-day stay in a five-star Bellevue hotel, flights included, would be £713 per person. A couple of weeks ago, that would've been £460. 

In the short-term, this is a difficult time for foreign investors in Switzerland. But the hard part should be over; recent activity in the currency markets suggests the SNB has acted since to keep the franc down. Rabobank analyst Jane Foley also believes the rate will remain settled for the next six to 12 months. The best way to transfer money to or from Switzerland will really depend on how much faith you have in that prediction, and the reasoning behind it.

Comparison tool

Sending Currency
Buying Currency
Send USD Receive

Latest Articles

Andy Ferguson

Format is very organized and incredibly informative. All the information is right there and it is all pertinent to what I need to know. Great work.

V Piccciani

Everything went great. The money is in the account in Brazil exactly the amount we agreed, very fast and safe, thank you very much for the service
International payments - overseas money transfers

INTERNATIONAL MONEY TRANSFERS FOR BUSINESSES

As a business, making global payments involves many risks, including exchange rate risk. If you are making regular transfers the cumulative costs due volatile exchange rates can be excessive. We can empower you to make International Payments cheaper and easier for your business.

Purchasing overseas property - satisfying your currency needs for payment

EMIGRATING - TRANSFERRING YOUR ASSETS OVERSEAS

Moving overseas can be daunting, with many unexpected aspects to your move you might not have considered. We cover all the financial basics of moving abroad, from the expenses to consider to the most cost-efficient ways to transfer your bank accounts and financial assets to your new home.

Market Insights

Sign up for our newsletter.

Thank You for subscribing to our Newsletter

You have successfully signed up to our Newsletter