Why Is the Swiss Franc So Strong? The 1970s Crisis That Created the Ultimate Safe-Haven Currency

Why is the Swiss franc so strong? The story starts on Sunday, 15 August 1971, when Richard Nixon went on American television and closed the “gold window”. Foreign central banks could no longer swap their dollars for gold. In Switzerland, a country that had built its money on gold and stability, the decision set off a chain reaction that nobody in Bern wanted. Within 18 months, the franc was floating, exporters were in a panic, and the economy was heading for its worst year since the war.

In 1970, one US dollar bought 4.31 francs on average. In September 2026, it bought about 0.82. Few currencies have gained so much against the dollar in the last half-century.

The usual story is a happy one: the strong franc forced Swiss industry to move upmarket, and the country grew rich. That’s partly true, but the 1970s were far more painful than the legend admits. Here is how the crisis unfolded, why the franc became the world’s favourite safe haven, and what it means if you want to hold Swiss francs yourself.

Why is the Swiss franc so strong? The short answer

So why is the Swiss franc so strong today? There is no single secret. The franc's strength comes from a handful of habits that Switzerland has kept for decades, and economists broadly agree on what they are.

The most important is boring: low inflation. From 1973 to 2025, Swiss consumer prices rose about 2.6 times, while US prices rose more than sevenfold. When prices rise more slowly at home than abroad, a currency tends to gain value, and much of the franc's long climb simply reflects that gap.

On top of this come steady current account surpluses, a large stock of foreign wealth, a credible central bank and stable politics. Finally, there is the safe-haven reflex: when markets panic, investors buy francs, and the currency jumps just when Swiss exporters can least afford it. Explore the six drivers below.

Before 1971: a franc chained to the dollar

Strangely, Switzerland was not among the 44 nations at the 1944 Bretton Woods conference, which fixed the world's currencies to the dollar and the dollar to gold. It stayed outside the International Monetary Fund until 1992, when voters approved membership in a referendum, a process our guide to Swiss direct democracy explains. In practice, though, the franc followed the system, at between 4.28 and 4.37 francs to the dollar from 1950 to 1970.

The franc already had a reputation by then. In 1936, Switzerland had been one of the last countries in Europe to give up the gold standard, and it devalued the franc by about 30% only when it had no choice. Bankers abroad remembered that stubbornness. During the Second World War, it was one of the few freely convertible currencies, a role our story of Switzerland and Nazi gold explores in its darkest form. Afterwards, the Swiss National Bank (SNB) kept the franc backed by gold, a link that lasted until 2000, as we describe in our article on Swiss mountain gold vaults.

By the late 1960s, however, the system was creaking. The US ran deficits, investors lost faith in the dollar, and money poured into strong currencies like the franc and the Deutsche Mark. To hold the fixed rate, the SNB had to buy every dollar that came in, printing francs to do it. On 9 May 1971, Switzerland gave up part of the fight and revalued the franc by 7.07%.

1971 to 1973: the system breaks

Three months later came Nixon's announcement. Besides closing the gold window, he slapped a 10% surcharge on all dutiable imports, an early echo of the tariff fights of 2025. The SNB stopped buying dollars, and for four months the franc floated.

In December 1971, the major economies patched the system together at the Smithsonian Institution in Washington. The dollar was devalued against gold, and the Federal Council set a new central rate of 3.84 francs per dollar. The repair lasted barely a year.

In January 1973, a currency crisis in Italy sent another wave of money into the franc. On 23 January, the SNB stopped buying dollars and left the franc to the market. Switzerland was among the first countries to let its currency float, and most other industrial nations soon followed.

Nobody in charge was keen. Fritz Leutwiler, then a director of the SNB, had called flexible exchange rates "utopian" only two years earlier. He later admitted that he had no idea how to run monetary policy without a fixed rate. Within a few years, the SNB had switched to targeting the money supply, one of the first central banks to do so.

The panic: negative rates and a ceiling on the franc

Once freed, the franc climbed relentlessly. Exporters, from watchmakers in the Jura to machine builders in Winterthur, watched their prices abroad rise with every swing. Switzerland responded with a surprisingly modern toolkit.

First came restrictions on foreign money. From 1972, foreigners could not earn interest on new franc deposits, and they were banned from investing in Swiss securities and property. In November 1974, the government reintroduced the interest ban and added a commission on new foreign franc balances, in effect a negative interest rate. Two months later, the charge rose to 10% per quarter. Then, in February 1978, it was extended to all foreign balances above five million francs, and the ban on foreign purchases of Swiss securities returned.

None of it was enough. Between October 1977 and October 1978, the franc gained 48% against the dollar, which briefly fell to about 1.45 francs. So on 1 October 1978, the SNB announced a new goal: it would keep the Deutsche Mark well above 80 francs per 100 marks. It bought foreign currency by the billion, and the franc finally eased.

In 1978, the money supply grew by 16.2%, more than three times the SNB's target, and the bank openly accepted the inflation risk. A strong franc, it turned out, could only be fought by printing a lot of it.

1975: the year the bill arrived

The worst damage, however, came earlier. In 1973 and 1974, the oil shock hit just as the franc soared and inflation reached almost 10%. In 1975, Swiss GDP fell by 6.7%, still the deepest drop since the Second World War. Between 1973 and 1976, employment shrank by more than 10%.

There was one upside. The strong franc made imports cheaper, and by 1976 Swiss inflation had fallen to 1.7%. Yet the human cost was hidden, because official unemployment stayed below 1%. Switzerland had no compulsory unemployment insurance, and many of the people who lost their jobs were foreign workers on temporary permits. About 250,000 foreign workers left the country between 1973 and 1977. In 1970, foreigners had made up about a quarter of the workforce, and their departure hid much of the crisis from the statistics.

Some industries never recovered their old size. The watch industry suffered a double blow from the strong franc and cheap quartz watches from Asia and the US. It employed about 90,000 people in 1970 and only about 30,000 by 1988, a collapse we tell in full in why Swiss watches are so expensive. Across the whole economy, industry's share of jobs fell from 46% to about 39% during the 1970s, according to census figures.

How the strong franc reshaped Swiss industry

So did the franc force Switzerland to abandon cheap manufacturing? Not quite. The country never had much cheap manufacturing to begin with, and its pharmaceutical giants in Basel were already world leaders. What the franc did was sort the winners from the losers.

The economic historian Tobias Straumann puts it simply: "Continuous upward pressure on value forces the economy to specialise and innovate." Companies that competed on price, such as textile mills and makers of simple goods, shrank or moved abroad. Companies that sold quality, patents or reliability could pass on higher prices and kept growing. Swiss supporters of a strong currency even have a name for it: the Währungspeitsche, or currency whip.

The result is visible in the export figures. In 2025, chemicals and pharmaceuticals brought in a record 152 billion francs, more than half of all Swiss goods exports. Precision machinery, medical technology and luxury watches fill much of the rest. Private banking, meanwhile, grew into a global business built on trust in the franc, as our history of Swiss banking secrecy shows.

The whip still hurts, though. Every wave of appreciation has cost jobs, from watchmaking in the 1970s to parts of the machinery industry today, as union economists regularly point out. The strong franc made Switzerland leaner, but not painlessly. Our article on why Switzerland is so rich puts this in the longer story of Swiss prosperity.

A Swiss franc safe haven, tested again and again

Why is the Swiss franc so strong whenever the world panics? Since the 1970s, the pattern has repeated itself. When the world gets scared, money flows into Switzerland. A study published by the SNB found that the franc tends to gain against the dollar when US share prices fall, when US bond prices rise and when currency markets become more volatile.

The 2008 financial crisis and the euro crisis that followed brought the biggest test. In August 2011, the dollar averaged just 0.78 francs, and the euro approached parity. On 6 September 2011, the SNB announced that it would no longer tolerate a rate below 1.20 francs per euro and would buy foreign currency in unlimited quantities to defend it.

The floor held for over three years. Then, on 15 January 2015, the SNB abandoned it without warning and cut its key rate to −0.75%. The franc jumped within minutes, briefly trading at below one franc per euro. In Switzerland, that day is still known as the Frankenschock.

Negative rates lasted until September 2022, when inflation returned. The SNB's huge foreign currency holdings, bought to weaken the franc, also left it exposed: in 2022 it reported a record loss of 132 billion francs. Then, in August 2025, the United States imposed tariffs of 39% on Swiss goods. A deal in November cut them to 15%. The SNB, which had already lowered its rate to 0% in June 2025, kept it there in September 2026.

Even Swiss banknotes behave like a safe haven. An SNB study found that around 60% of all banknotes were being hoarded rather than spent, and up to 89% of 1,000-franc notes in 2017.

Is the franc too strong?

For Swiss exporters, the answer is often yes. A stronger franc raises the price of every watch, machine and tourist night in foreign currency, while competitors in the eurozone face no such handicap. That's why the SNB has spent much of the past 15 years leaning against the currency, with negative rates, a floor and massive purchases of euros and dollars.

Those purchases have political side effects. In December 2020, the US Treasury labelled Switzerland a currency manipulator, after the SNB bought about 110 billion francs of foreign currency that year to calm a pandemic rush into the franc. In April 2021, it reported that it had found insufficient evidence of manipulation and dropped the label. The episode showed the trap the SNB lives in: if it does nothing, industry suffers; if it intervenes, trading partners complain.

For Swiss savers and shoppers, a strong franc feels very different. Holidays abroad get cheaper, imported goods cost less, and Swiss pensions hold their value against foreign currencies. Cross-border shopping in Germany, France and Italy is a national habit for exactly this reason.

The truth is that the franc is not always rising. In the early 1980s, the dollar climbed back from about 1.67 francs to 2.46 in 1985, before falling again. In 2026, the franc lost some ground too, which the SNB said was helping the economy. So why is the Swiss franc so strong over the long run? Because the forces behind it outlast any single crisis, even when the currency takes a break.

What if you had held Swiss francs?

Long-term charts can hide how big the franc's moves have been for ordinary savers. A dollar saver who swapped into francs in the 1970s and simply waited would have seen the value of those savings, measured in dollars, multiply several times over. The calculator below swaps money into francs at the average rate of a year you choose and back again at the September 2026 rate. It ignores interest, which for franc deposits has often been close to zero, so treat it as a lesson in currencies rather than a recipe.

How to hold Swiss francs for non-residents

If the franc's history makes you want some yourself, there are several routes, each with its own trade-offs. None of them earns much: with the SNB's rate at 0%, interest on francs is low or nil.

The classic route is an account at a Swiss bank. Foreigners can open one, but banks check identity, residence, tax status and the source of funds, and many ask non-residents for high minimum deposits. Some banks don't accept clients from certain countries, and US persons face extra hurdles. In return, deposits up to 100,000 francs per client and bank are protected if a Swiss bank fails.

Simpler options exist. Many banks and payment apps abroad let you hold a franc balance, although the protection rules of the country where the provider is licensed apply, and e-money apps are often not covered by deposit insurance at all. Swiss franc cash is another option, if you have a safe place for it. Investors can also buy Swiss government bonds or franc money market funds through a broker. Interest from Swiss bonds and Swiss-based funds carries a 35% withholding tax, refundable in full or in part under tax treaties, depending on where you live.

The options at a glance

Above all, remember that currency risk works both ways. The franc weakened sharply against the dollar in the early 1980s, and it lost ground again in parts of 2026. Holding francs is a bet on Swiss stability, not a guarantee. The table below compares the main options; it is general information, not financial or tax advice.

Timeline: the Swiss franc from 1850 to 2025

Quiz: true or false?

What the franc says about Switzerland

Why is the Swiss franc so strong, then? It is not an accident or a trick. The franc's strength is the price, and the reward, of habits that run deep in Swiss history: a dislike of debt, a central bank that guards its independence, a country that stays out of other people's wars, and an economy that has to earn its living abroad.

That combination makes the franc a magnet in every crisis. It also links many of the stories on this site, from the gold hidden in the Alps to the art stored at the Geneva Freeport. In each case, people from abroad are buying the same thing: a piece of Swiss stability.

The 1970s showed how expensive that can be for the Swiss themselves. A currency everyone wants is wonderful for savers and a constant headache for exporters. More than fifty years after the float, Switzerland still hasn't found a way to have one without the other, and it probably never will. For a small, open country, that tension is simply part of the deal. Each new crisis, from the oil shocks to the euro crisis to the tariff war of 2025, has tested it again, and each time the franc has come out stronger in the long run.

FAQ: the Swiss franc

Sources and further reading