The Swissy currency, also referred to as S&P 500, is quite popular in the forex trading space to offer some obvious disadvantages. This Forex review will briefly break down the history of this particular USD/ CHF relationship, both for its advantages and disadvantages. In essence, this is a relationship that has flourished mainly due to trading in large-scale global currencies. The relationship between the two currencies is characterized by strong trading liquidity, low commissions, good marketability, a stable value and high profitability.
The Swiss franc (franc FX) and the Euro are the most traded currency pairs in the world. These two pairs comprise approximately half of all currencies traded on global markets. The Swiss economy is one of the world’s strongest economic entities, so much so that it accounts for around 2% of world Gross Domestic Product (GDP). The strong national economic status of Switzerland attracts investors from across the globe, resulting in constant fluctuations in the value of Swiss Francs.
As per the World Wide Web, there are approximately seventy-five different foreign currency pairs in which the Swiss economy trades. Among these, the Swiss franc is the most frequently traded currency in terms of global trade. The Swiss economy relies on exports and imports for its foreign exchange earnings. The currency value of Swiss Francs is largely affected by the exchange rate between the Swiss franc and the US dollar. The Swiss government and central banks successfully control the level of Swiss Francs in international foreign exchange.
One of the main reasons why Swiss Francs are traded at such a low price is because they are highly valued as a result of their strong economic performance. The strong investment potential of Swiss Francs ensures that they remain high on buyers’ lists. Besides, compared to other currencies traded on the Forex, Swiss Francs is relatively less flexible in nature.
There are two main trading pairs of foreign currency where Swiss Francs play a major role. These are Euro vs US Dollar and Swiss Franc vs Japanese Yen. The trade between the euro and the dollar occurs due to the increasing demand for European commodities like oil, dairy and other manufactured goods. On the other hand, the Swiss Franc trades due to the decreasing demand for European commodities like gas and oil. The low Swiss Franc value enables traders to purchase and sell currency pairs at affordable costs.
In order to hedge against currency losses, most of the Forex traders usually go for hedging instruments. These can be in the form of exchange-traded funds (ETF), foreign exchange swap agreements or forward contracts. While some of the ETFs are managed by professional managers, majority of the Forex traders prefer to go for the non-managed ones. However, while buying these types of Forex products, traders should bear in mind to never invest in a company that has less than two percent share of the market. Never go for the trading of a company that does not have a proven track record as well.
Another popular type of investment vehicle used by the Forex traders is the forward contract. This is similar to that of a swap transaction. It also includes the trade deal that involves the purchase of a specific amount of U.S. dollars with the right to sell them back later. This trade deal is known as forex futures. Although this product has immense potential, only highly experienced and knowledgeable traders can gain optimal benefits from using it.
One of the most popular investment vehicles used by the Forex brokers and traders is the spot deal. This is an agreement between the seller and the buyer, which allow them to exchange a particular currency instantly. The major benefit that buyers gain from using this is that they are able to obtain the commodity that is in the exact spot price at a pre-determined rate. The major downside of this currency pairing is that there is no guarantee when the market turns over to the other side.