The Swiss currency has been successively losing on value to most currencies in other countries. In relation to the forint or the Czech koruna, the franc has already fallen into the quotes before the "black Thursday". Unfortunately, the zloty has been also struggling recently with problems - writes Marcin Lipka, senior analyst Cinkciarz.pl.
Since April 24, so the opening of quotations after the first round of French elections, the franc has been gradually losing value. Reducing the political risks in the eurozone and the significant decrease of euro area's disintegration risk are the main reasons for the better shape of the European currency and the worse Swiss.
The reduced attractiveness of the franc as a "safe haven" has been also due to better prospects for economic growth in the European Union and in emerging countries. These markets have been becoming increasingly attractive to foreign investors, which also leads to capital outflows from, i.a. Switzerland.
Higher GDP growth usually supports slightly higher inflation and less mild monetary policy. The European Central Bank is likely to begin withdrawing its assets from the market soon, and afterwards, it may start raising the interest rates. In Switzerland, according to recent SNB projections, prices should not rise above 0.5%. YOY by the end of 2018. Due to the absence of inflationary pressure, the chances of any change in the monetary policy suggestion have been significantly limited in the coming quarters.
The zloty has been benefited, but not as much as forint or koruna
Apart from the better world's economy and the decreasing attractiveness of the Swiss currency as a "safe haven", the central bank has been constantly trying to weaken the franc. Thomas Jordan, chairman of the SNB, said in an interview to Le Temps on July 24 that "... the franc is still clearly overvalued by our models and indicators. That is why we keep negative percentages and we will intervene when necessary. "
The global weakening of the franc has translated into the decline of the CHF/PLN pair, whose quotations at the end of July fell to the range of PLN 3.75-3.8. However, all the time, the franc is about 6% above levels (PLN 3.55) posted on January 14, 2015, the day before the release of EUR/CHF.
The Czech currency (CZK) and the Hungarian one (HUF) have been much better than the zloty. The CHF/CZK pair has been currently quoted close to 23.00, which means that the franc to the koruna has been already less expensive than before the "Black Thursday".
The forint in relation to the franc has been the only one slightly worse than the koruna. The CHF/HUF pair fell at the end of July to the 270 limit. It's only 1 percent more than the closing price on January 14, 2015. If the zloty was similar to the forint on the global market, the franc - instead of PLN 3.75 - would cost less than PLN 3.6.
If only the investors have borrowed more franc
On the currency market, it is difficult to identify the exact reasons for the better condition of one or the other currency. In spite of very strong movements observed after "black Thursday" until August 2015, the CHF/HUF and CHF/PLN quotations have practically overlapped.
The second half of 2015 was already worse for the zloty, but the turning point for a much more sceptical approach to the zloty was when S&P Global Ratings has downgraded its credit rating. And although this matter has already begun to fade, the zloty has failed to catch up with the forint.
Moreover, the political events in recent days have a negative impact on the national currency. The zloty lost about 1.5 percent in relation to forint due to the situation in Poland. If not for this loss, then probably the franc would already be below 3.7 zł.
Apart from local issues, the global events have been still the most important element in the long run. If the good sentiment in the eurozone persists and the SNB does not change its approach to the monetary policy, then the franc should remain weak.
The real breakthrough would be the situation in which global investors, using extremely low interest rates, would massively borrow francs and invest outside of Switzerland (carry trade strategy). If such a scenario outweighed, we could have seen a long-term decline in CHF values and a drop in its quotations clearly below the before "black Thursday" levels, also in relation to the zloty.