Swiss National Bank New Currency Index: Franc Remains Substantially Overvalued

In its latest quarterly bulletin, the Swiss National Bank (SNB) unveiled its revised calculation method for the Swiss franc’s exchange rate. Under the new methodology, the nominal effective exchange rate index was at 156.5 in early March with the December 2000 value set at 100. Compared with the previous calculation, there franc is valued slightly higher with the old index at 155.0.

The gain in nominal terms is due to the persistently very low rates of inflation in Switzerland and the SNB also introduced a new calculation method for the real external value of the franc.

Under the new index the real franc index is at around 114.0 compared with a figure just above 120 under the old index with December 2000 set at zero. The new value is close to the index produced by the BIS while the IMF index is closer to the old SNB method.

All the measures suggest that the franc remains significantly overvalued in real terms, although the new index suggests the degree of overvaluation is less extreme. Significantly, the franc was overvalued by around 10% before the 2015 currency float.

The short-term impact should be limited with further intervention to cap franc appreciation. Over the medium term, the SNB may be slightly less determined to intervene aggressively to prevent franc gains, especially if the headline inflation rate is positive.

Swiss Franc Real External Value


Tim is a contributing author to He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.