The value of the Swiss franc has risen as investors turn to safe financial havens amid fears that the violence in the Middle East could escalate.
As fighting erupted in Bethlehem and other West Bank towns on Tuesday, the Swiss franc stood at 1.46 against the euro.
"Clearly the Swiss Franc has risen sharply against the euro and the United States dollar in the last few days," said Hans-Peter Hausheer, a senior economist at UBS.
"It's part of a historic trend, whereby gold and the Swiss franc are always considered to be safe havens by investors when there are world events that threaten to involve the US or the European Union," he added.
Hausheer, however, expressed scepticism at the usefulness of this monetary trend. "It's a bit senseless to place your faith in the Swiss franc, because these days Switzerland is in the same position as other European nations."
Strong Swiss franc
Matthias Bucher, an economist at Zurich Cantonal Bank, believes the current strength of the Swiss franc reflects a general rise in its value since 2000 rather than the effect of recent world events.
"A lot of the increase is to do with the introduction of the euro and the fact that it's no longer possible to diversify and to trade in French francs or German marks - now it's just the euro and the Swiss franc," he said.
"Nevertheless, I would still expect the Swiss franc to appreciate dramatically in the case of renewed unrest or terrorist attacks," added Bucher.
The most damaging consequence of a rise in the value of the Swiss franc is on exports - 70 per cent of which are destined for the euro-zone countries, explains Hausheer.
"We're approaching a dangerous limit of SFr1.50 to the euro, which would be damaging to exporters," says Hausheer.
But Hausheer expressed confidence in the Swiss National Bank's current policy of introducing more liquidity into the market. "For the moment, the National Bank can afford to continue to do that - but the long term danger is that inflation might rise."
by Vanessa Mock
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