The Swiss franc explained: the SNB, safe-haven flows and the 2015 shock

The Swiss franc (CHF) is the currency of Switzerland and Liechtenstein, managed by the Swiss National Bank (SNB). Traders know it mainly as a safe haven: when markets turn fearful, money tends to flow into the franc, and the SNB has spent much of the last fifteen years trying to stop it from getting too strong. That tug of war between safe-haven demand and a central bank leaning against it explains most of how franc pairs behave, including the most famous single-day shock in modern retail forex: the removal of the EUR/CHF floor on 15 January 2015.

This guide covers what the franc is, why it attracts money in a crisis, how the SNB works, what happened in 2015 and why it still matters, and what that means if you trade USD/CHF or EUR/CHF.

The franc in brief

Switzerland is a small, open, wealthy economy with a large financial sector, big pharmaceutical, machinery, watch and chemical exporters, and a long-running surplus on its current account. That surplus, built up year after year, means the country as a whole owns a lot of foreign assets. Swiss households, pension funds and companies hold large investments abroad.

The franc is one of the most traded currencies in the world despite the size of the economy behind it, and it is part of the group regulators treat as majors. Under the ESMA rules for retail clients, any pair combining USD, EUR, JPY, GBP, CAD and CHF counts as a major pair with a maximum leverage of 30:1, so USD/CHF, EUR/CHF, GBP/CHF and CHF/JPY all sit in that band (see ESMA leverage limits).

The pairs you will see most often:

• USD/CHF, sometimes nicknamed the "swissie", quoted as francs per US dollar.
• EUR/CHF, the pair that matters most to the SNB because the euro area is Switzerland's largest trading partner.
• GBP/CHF and CHF/JPY, crosses that combine the franc with other major currencies and tend to be more volatile.

Because the quote currency in USD/CHF is the franc, a rising USD/CHF means a weaker franc and a falling USD/CHF means a stronger franc. That trips up beginners who expect "CHF up" to mean "chart up". If you are unsure how quote conventions work, currency pairs explained goes through it.

Why the franc is a safe haven

A safe haven is an asset that investors tend to buy, or at least stop selling, when they are worried. The franc earns that label for several overlapping reasons, none of which on its own would be enough:

• Political and institutional stability. Switzerland has a stable political system, a strong rule of law and a central bank with a reputation for keeping inflation low.
• Low inflation history. Swiss inflation has generally run below that of its neighbours over long periods, which preserves the currency's purchasing power.
• A large stock of foreign assets. When markets fall, Swiss investors may bring money home, selling foreign assets and buying francs. Foreign investors looking for somewhere conservative to park cash may do the same.
• Deep financial markets and a long track record. The franc has been a store of value through many past crises, and that reputation is self-reinforcing: people buy it in a crisis partly because they expect others to.

The effect shows up as a pattern rather than a law. In a sharp risk-off episode, the franc often strengthens against higher-yielding and more cyclical currencies such as the Australian dollar, and against the euro when the stress is European. It shares this role with the Japanese yen and, to a degree, the US dollar and gold. Which haven wins on a given day depends on where the stress comes from: a US-centred shock may not lift the dollar, while a euro area shock tends to favour the franc over the euro. The Japanese yen guide covers the other big haven currency.

Nothing locks safe-haven behaviour in place. It is a tendency that has held in many episodes and failed in some, and the SNB itself is the main reason it can fail.

The Swiss National Bank

The SNB is Switzerland's central bank. Its mandate is price stability, which it defines as consumer price inflation of below 2% a year, while taking the state of the economy into account. Unlike many central banks it is a listed company (its shares trade on the Swiss exchange), although the cantons and cantonal banks hold most of the shares and private shareholders have limited rights.

How and when it decides

The SNB conducts a monetary policy assessment once a quarter, in March, June, September and December. That is less often than the Federal Reserve, the ECB or the Bank of England, which meet roughly every six weeks. The practical consequence for traders is that each Swiss decision carries more weight, and the SNB has a history of making surprise moves, sometimes outside its scheduled dates when circumstances demanded it.

The decision is announced in the morning, European time, and followed by a press conference. Check the SNB's own calendar for exact dates and times, as they can change, and use the market hours tool to convert to your own time zone.

The two tools that matter for the franc

The SNB has two main levers that affect the exchange rate directly:

1. The policy rate. Like other central banks, the SNB sets a policy rate. Higher Swiss rates make holding francs more attractive; lower ones less so. The central banks and interest rates guide explains how rate differentials feed into exchange rates.
2. Foreign-exchange intervention. The SNB has stated many times that it is willing to buy or sell foreign currency as needed. To weaken the franc it creates francs and buys foreign currency, mostly euros and dollars, which it then invests. This is why the SNB's balance sheet grew so large in the 2010s. Intervention is the tool that makes the SNB different from most other major central banks, which rarely intervene in their own currencies.

The SNB has used both tools together. Faced with a franc it considered heavily overvalued, it pushed its policy rate below zero and bought foreign currency in large amounts. In more recent years, when inflation picked up across Europe after 2021, it was willing to let the franc strengthen and even sold foreign currency, because a stronger franc helps hold down imported inflation. The direction of intervention depends on the problem the SNB is trying to solve.

Negative rates

When the SNB first introduced a negative rate on banks' sight deposits in December 2014, effective from January 2015, it was trying to make holding francs less appealing. After the floor removal, it lowered that rate to -0.75%, where it stayed for years. Negative rates meant that, in principle, holding francs cost money rather than earning it.

For forex traders, negative Swiss rates had one very practical effect: the overnight swap on franc pairs. If you were long a currency with a higher rate against the franc, such as USD/CHF while US rates were positive, the rate differential worked in your favour before broker mark-ups. Short positions in such pairs typically paid swap. That made the franc a popular funding currency for carry trades, a role it shared with the yen. The carry trade guide explains how that works and why carry trades can unwind violently in exactly the kind of risk-off moment in which the franc tends to rise.

The SNB ended negative rates in 2022, raising its policy rate above zero in September of that year as inflation rose. Rates have since moved again, so check the current SNB policy rate rather than relying on any figure you read in an older article. The swap you see on your platform depends on the current differential plus the broker's mark-up, as covered in swap and overnight financing.

The EUR/CHF floor and 15 January 2015

This is the episode every franc trader should know.

The floor

During the euro area debt crisis in 2010 and 2011, investors poured money into the franc. EUR/CHF fell sharply and briefly came close to parity. Swiss exporters and the tourism industry were under severe pressure, and there was a risk of deflation. On 6 September 2011 the SNB announced a minimum exchange rate of 1.20 francs per euro and said it would buy foreign currency in unlimited quantities to enforce it.

For over three years the floor held. EUR/CHF spent long periods just above 1.20, with the SNB absorbing the selling. The pair became extremely quiet. Many traders came to treat 1.20 as a hard level: buy near it with a tight stop just below, and the SNB would do the work.

The removal

On the morning of 15 January 2015 the SNB announced that it was discontinuing the minimum exchange rate with immediate effect and ceasing the associated foreign currency purchases. At the same time it cut its deposit rate further, to -0.75%. In its explanations afterwards, the SNB said that enforcing the floor was no longer justified and that the intervention required to hold it had been increasing rapidly.

The announcement came without warning. The SNB had defended the floor publicly in the weeks before, which is part of why the market was so badly positioned.

What happened to prices

The franc surged. EUR/CHF and USD/CHF fell by well over 10% within minutes, with EUR/CHF briefly trading far below parity before recovering part of the move later that day. For a while liquidity effectively disappeared: prices jumped from level to level with few or no trades in between, and banks and brokers struggled to quote at all.

For retail traders the problem was not just the size of the move but the gap. A stop loss is an instruction to close at the next available price once a level is touched. When the next available price is hundreds or thousands of pips away, that is where the stop is filled. Traders who had stops 20 or 50 pips below 1.20 found them executed far lower, and some accounts went deeply negative.

The fallout was serious for the industry. Several brokers reported large losses because clients could not cover their negative balances, and some firms failed or had to be rescued. The episode is one of the events cited in the debate that led to mandatory negative balance protection for retail clients in the EU from 2018.

Worked example: the stop that did not save you

These numbers are illustrative, not the actual fills of any specific broker on the day.

Suppose a trader with a 10,000 euro account bought 1 standard lot (100,000 euros) of EUR/CHF at 1.2010, with a stop loss at 1.1960. The stop distance is 50 pips. On EUR/CHF a pip is 0.0001 francs, so on 100,000 euros a pip is worth 10 francs.

1. Planned risk: 50 pips multiplied by 10 francs = 500 francs, which at an exchange rate of about 1.20 is roughly 417 euros, or about 4% of the account. Already on the high side, but it looks controlled.
2. Now suppose the stop is hit in the gap and filled at 1.0500 instead of 1.1960. The loss is 1.2010 minus 1.0500 = 0.1510, or 1,510 pips.
3. Actual loss: 1,510 pips multiplied by 10 francs = 15,100 francs. Converted at the new rate of about 1.05, that is roughly 14,381 euros.

The trader lost more than the whole account, about 30 times the planned risk. Without negative balance protection, the broker could ask for the shortfall of roughly 4,381 euros. With it, under today's EU and UK retail rules, the account stops at zero, but the account is still gone.

The lesson is not about the franc specifically. Any position can face a move far beyond its stop when a policy changes, an announcement lands or a weekend passes. The gap risk and weekend risk guide covers how to size for it, and the position sizing guide explains why the stop distance is only one input.

What moves franc pairs today

With no floor, the franc trades freely, but the SNB's presence never goes away. The main drivers:

• SNB decisions and communication. The rate decision, its wording on willingness to intervene, and comments from SNB officials between meetings. A shift in emphasis from fighting franc strength to tolerating it can matter as much as a rate change.
• Swiss inflation. Monthly consumer price data from the Federal Statistical Office feeds directly into the SNB's thinking, because its target is defined in terms of inflation. The inflation and currencies guide explains the general mechanism.
• The other side of the pair. For USD/CHF, US data and Federal Reserve decisions often dominate. For EUR/CHF, ECB policy and euro area data matter. Much of the day-to-day movement in USD/CHF is really dollar movement.
• Risk sentiment. Equity sell-offs, geopolitical shocks, banking stress and similar events tend to lift the franc, especially against cyclical currencies.
• Euro area stress. Because EUR/CHF is the SNB's main concern and the euro area is next door, political or financial worries in the euro area often show up first as franc strength against the euro.
• Intervention signals. The SNB publishes data on banks' sight deposits held with it, and analysts watch changes as a rough hint of intervention. It also discloses its foreign-exchange transactions with a delay. Neither is a real-time signal.

Correlations to know about

USD/CHF and EUR/USD have historically tended to move in opposite directions, because both are heavily driven by the dollar and the franc and euro often move together against it. A long EUR/USD and a long USD/CHF position can therefore partly cancel out, while a long EUR/USD and a short USD/CHF largely double the same dollar bet. Correlations shift over time and break down in exactly the stressed moments when you most rely on them; the currency correlation guide explains how to check rather than assume.

Character and costs

In ordinary conditions EUR/CHF is one of the calmer major pairs, because the two economies are closely linked and the SNB cares a lot about this rate. USD/CHF behaves more like a typical dollar pair. Crosses such as GBP/CHF and CHF/JPY usually move more and cost more to trade.

Spreads on USD/CHF and EUR/CHF are typically wider than on EUR/USD, and widen further around SNB announcements, during the rollover period and in thin holiday markets, as explained in why spreads widen. Swap depends on the current rate gap between the franc and the other currency, plus the broker's mark-up.

Worked example: pip value on USD/CHF

The pip value on any pair is worked out in the quote currency first. On USD/CHF the quote currency is the franc.

• 1 standard lot is 100,000 US dollars.
• 1 pip is 0.0001 francs.
• Pip value in francs: 100,000 multiplied by 0.0001 = 10 francs per pip.

If your account is in US dollars, convert at the current USD/CHF rate. With an illustrative rate of 0.8000, 10 francs is 10 divided by 0.80 = 12.50 dollars per pip. If the rate were 0.9000, it would be about 11.11 dollars. That is why the dollar value of a pip on USD/CHF changes as the rate moves, unlike EUR/USD where it is fixed at 10 dollars for a dollar account. The pip value calculator does this conversion for you.

Common mistakes with the franc

• Treating a central bank level as a wall. The 1.20 floor looked unbreakable until it broke. Any level that exists because a policymaker says so can disappear when that policymaker changes its mind.
• Assuming calm means low risk. A pair with a small daily range invites bigger positions. Bigger positions plus a rare large gap is the worst combination.
• Getting the direction backwards. In USD/CHF, a stronger franc means a lower price. Many beginners place orders the wrong way round on franc pairs.
• Expecting the franc to rise in every sell-off. The safe-haven pattern is a tendency. If the SNB is actively selling francs, or the stress is centred elsewhere, the franc can lag or fall.
• Forgetting the SNB meets only quarterly. A quarterly decision carries more information, and surprises cluster there. Spreads and slippage around those announcements can be large; see slippage explained.
• Using carry without thinking about the unwind. Borrowing in francs to hold a higher-yielding currency can look steady for months and then give back much of the accumulated swap in a few days of risk-off.

Frequently asked questions

Why is the Swiss franc considered a safe haven?

Because Switzerland combines political stability, a long record of low inflation, a large current account surplus and big holdings of foreign assets. In a crisis, Swiss investors may bring money home and foreign investors may park cash in francs. The pattern is a tendency based on reputation and history, not a rule, and SNB policy can override it.

What happened to the Swiss franc on 15 January 2015?

The Swiss National Bank ended its minimum exchange rate of 1.20 francs per euro without warning and cut its deposit rate to -0.75%. The franc jumped by more than 10% against the euro and the dollar within minutes, liquidity briefly vanished, and many stop losses were filled far beyond their levels. Some retail accounts went negative and several brokers suffered heavy losses.

How often does the SNB set interest rates?

The SNB holds a monetary policy assessment once a quarter, in March, June, September and December, with the decision published in the morning, European time, and a press conference following. It can act between meetings if it considers it necessary. Check the SNB's website for the confirmed dates each year.

Why does USD/CHF often move opposite to EUR/USD?

Both pairs are dominated by the dollar, and the euro and franc tend to move in the same direction against it because the two economies are so closely linked. When the dollar weakens, EUR/USD rises and USD/CHF falls, and the reverse. The relationship is strong in normal times but not fixed, and it can break down when franc-specific news hits.

Does the SNB still intervene in the currency market?

The SNB has repeatedly said it is willing to be active in the foreign exchange market as necessary, and in different periods it has both bought and sold foreign currency depending on whether it wanted a weaker or stronger franc. It discloses its transactions only with a delay, so traders cannot see intervention in real time.

Is trading the franc safer than other currencies because it is a safe haven?

No. "Safe haven" describes how the currency tends to behave in a crisis, not how risky it is to trade with leverage. Franc pairs have produced some of the largest single-day gaps in modern forex. As with any leveraged product, most retail CFD accounts lose money, and the risk warning applies in full.