For the first time since the floor for the franc-to-euro exchange rate was removed, the Swiss franc is worth exactly as much as the euro. On March 4, the value of the euro reached a new low of 1.0020. The is the first time since January 26, 2015, that the rounded euro price is equal to the Swiss franc. In the days that followed, 1 franc was even worth more than 1 euro at times.
There are various factors which contributed to the euro and Swiss franc finally reaching parity seven years after the removal of the franc-to-euro floor. Investors have been rushing to the Swiss franc for several months now due to ongoing economic worries in the Eurozone and around the world. That has steadily driven up the price of the franc.
The escalation of the conflict in the Ukraine has caused a massive spike in worry over Europe’s economy over the past week, causing a massive devaluation of the euro. The euro also crashed against the US dollar. The devaluation of the euro further strengthened the relative value of the Swiss franc.
Swiss export companies are suffering
A strong franc has a disadvantage for the Swiss economy in that it discourages exports. That reduces the competitiveness of export-orientated Swiss companies. It also encourages residents of Switzerland to spend money in neighboring countries instead of in Switzerland by boosting their purchasing power abroad.
What is not yet clear is how long the franc can continue to gain against the euro before the Swiss National Bank (SNB) intervenes. It may choose to discourage franc-to-euro parity and prop up the Eurozone’s currency by buying large amounts of euros. But interventions like these are usually only made known after they have already taken place.
A de-escalation of the conflict in Ukraine would also likely result in the euro regaining value against the Swiss franc.
More on this topic:
The financial impacts of the Ukraine conflict explained
