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Swiss firms expect slightly stronger euro and stable US dollar in 2022

As part of the Credit Suisse FX Survey 2022, around 1,100 companies were asked about how they manage foreign currency

The euro and the US dollar remain by far the most important foreign currencies for Swiss companies in terms of purchasing as well as sales. In addition, more than one in ten firms use an Asian currency to purchase or sell goods and services. The companies surveyed expect the euro to appreciate slightly against the Swiss franc on average over the course of 2022; as for the USD/CHF exchange rate, they anticipate a sideways trend. The pronounced uncertainty seen in 2021 has subsided, with the distribution of exchange rate forecasts now significantly lower. At about 40%, the proportion of businesses that hedge their foreign currency risks remains roughly the same. The reasons for not engaging in hedging vary, with over half prepared to accept the risk.

The companies that took part in the annual Credit Suisse FX survey expect a EUR/CHF exchange rate of 1.08 by the end of 2022, meaning a slight appreciation for the euro. By contrast, no major changes are expected in the case of the US dollar: The firms anticipate an exchange rate of 0.93 versus the Swiss franc by the end of 2022. In contrast with the previous year's survey, their views on exchange-rate developments coincided more closely amid a lower degree of uncertainty. At the same time, almost one-fifth expect the Swiss National Bank (SNB) to hike interest rates by the end of the year while 80% think the base rate will be kept at -0.75%.

Euro remains chief currency for purchasing
In terms of purchasing, the euro is still more heavily used than the Swiss franc. Some 78% of the companies surveyed pay for goods and services at least partly in euros, with a figure as high as 85% in the industrial sector and 71% in the service sector (see Fig. 1). As for the Swiss franc, the figures are around ten percentage points lower at 70%, 75%, and 63% respectively. The second-most important foreign currency and third-most commonly used currency for purchasing is the US dollar, with 40% of the companies surveyed paying for at least a portion of their purchases in greenbacks – although there is little difference between the sectors. All other currencies account for a combined share of 10% when it comes to input purchases. On average, the EUR accounts for 44% of purchases for these companies and the USD for around one-third.

Euro and US dollar heavily used for sales, but Swiss franc is no. 1
The Swiss franc is the dominant currency when it comes to sales. Almost 70% of the companies surveyed sell at least a portion of their products and services in Swiss francs, while the figure for the euro is a little over half and for the US dollar around a quarter (see Fig. 2). Considerably more companies in the industrial sector say they use the euro (69%) and US dollar (39%) for sales too; this compares with 47% and 31%, respectively, in the service sector. For firms that use the euro and the US dollar, sales generated in these currencies account for 43% and 36% respectively. Other currencies play a role in sales of goods and services for 6% of companies.

Of the firms surveyed, 5% have foreign currency exposure (purchases and/or sales) to the Chinese yuan, while 3% conduct transactions using the Indian rupee. A total of 11% have exposure to at least one of the Asian currencies mentioned in the survey, and 4% to one of the South American currencies.

Almost 40% engage in partial hedging, with around a third opting for a "natural hedge"
Just under 40% of companies hedge their foreign currency risks. "This is a low figure considering the major importance of foreign currencies to Swiss companies as well as price risks on the foreign exchange markets," says Claude Maurer, Chief Economist Switzerland at Credit Suisse. Firms that do engage in hedging have an average hedging ratio of around 60%. Companies with exposure to Asian or South American currencies undertake hedging to a significantly greater extent (68% and 72%, respectively), whereas companies exposed to EUR or USD exchange rate risk tend to engage in hedging less frequently (38% and 43%, respectively).

"Natural hedging," i.e. buying and selling in the same currency, is the second-most common reason given in answer to the question about why exposure is not financially hedged (32%). The survey also reveals that increased flexibility (18%) and internal guidelines (16%) discourage firms from financial hedging. Over half of the companies surveyed (54%) said they were ready to consciously accept currency risk so that they might actually even benefit from it. Furthermore, some of the respondents had simply not yet considered hedging (12%), had limited resources (8%), or view the hedging process as too complex (4%).