Why is Switzerland currency so expensive?

Swiss companies, being export-oriented, face a unique economic dynamic. When they export their products, they receive payment in foreign currencies. However, their operational costs, including wages, rent, overheads, and taxes, are denominated in domestic currency, specifically the Swiss franc.

This peculiarity of the Swiss economy creates an interesting economic consequence. The proceeds from exported products, when converted back into francs to cover expenses, inevitably increases the demand for the franc on foreign exchange markets.

The growing demand for the Swiss franc, driven by the expanding exports, creates upward pressure on its exchange rate. This means that as exports increase, the value of the franc appreciates against other currencies.

The appreciation of the franc can have both positive and negative effects on the Swiss economy. On one hand, it makes Swiss goods and services more expensive for foreign buyers, potentially impacting export competitiveness.

On the other hand, the strong franc attracts foreign investors seeking a SAFE haven for their capital. This inflow of foreign capital further strengthens the franc and supports the Swiss economy by providing additional liquidity and funding for domestic businesses.