Inflation and the strong Swiss franc. The consequences for Swiss companies.

In 2022, the pandemic was no longer the greatest concern for Swiss companies. Instead, the focus shifted to other issues such as the rising level of inflation. Find out more about how this development is affecting exchange rate risks and how local companies can hedge themselves effectively.

New worries for Swiss companies

Even after the pandemic, the global economic situation has remained volatile. The challenges for internationally active Swiss companies have not gotten any smaller. In addition to the shortage of skilled workers and persistent supply chain problems, they have also had to deal with rising inflation rates.

 

These developments have affected exchange rates. "The Swiss franc gained strength over the course of the year, particularly against the euro," says Joel Raimann, Head of FX Sales Desk Eastern Switzerland at Credit Suisse. "To illustrate, the euro started 2022 at a rate of CHF 1.04. Since then, it has dropped below CHF 0.95."

FX Survey 2023 – exchange rate forecast

The study by Credit Suisse provides forecasts on foreign exchange rate development and offers an overview of how Swiss companies hedge their foreign exchange risks. Among other things, the comprehensive report highlights the risks associated with interest rate changes by central banks while providing in-depth insight into the hedging strategy of two internationally active Swiss companies.

11/01/2023

"The Swiss franc gained strength over the course of the year, particularly against the euro."

Joel Raimann
Head of FX Sales Desk Eastern Switzerland

Strong Swiss franc mitigating euro-zone inflation for importers

Export companies are suffering the most from the new strength of the Swiss franc. For companies that import goods from the euro zone, however, the strong Swiss franc is a positive development. "This is because the strengthening of the Swiss franc roughly compensates for the consequences of higher inflation rates in the euro zone countries," says Joel Raimann. This means that procurement costs have remained at roughly the same level for Swiss companies even though prices in the euro zone have risen dramatically.

Hedging exchange rate risks in volatile times

The high level of volatility in recent months has made it extremely difficult to predict developments on foreign exchange markets. Flexible hedging solutions are all the more important in times like these, says the FX expert. "Rolling hedging with forward transactions is a proven strategy." This allows companies to protect themselves from negative exchange rate developments while maintaining the ability to adapt the hedging strategy in accordance with new developments and to take advantage of any opportunities.

"Rolling hedging with forward transactions is a proven strategy."

Joel Raimann
Head of FX Sales Desk Eastern Switzerland

What exchange rate risks do Swiss companies expect to encounter in 2023?

Last year was marked by volatility and uncertainty, but what will internationally active companies need to look out for in the future? In the latest Credit Suisse FX survey, more than 1,000 Swiss companies share their views on exchange rate developments and provide information on how they are hedging their currency risks. In-depth analyses of current and future developments on foreign exchange markets from Credit Suisse experts also provide fascinating insights on the effective management of exchange rate risks.

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