2023-12-29 15:52:00
- On Thursday, the franc briefly strengthened against the euro to a new high and has been in the area of its all-time high ever since.
- For experts, this also has to do with the low trading volumes on the foreign exchange exchanges during the festive season.
- Overall, the franc, which strengthened in value in 2023, continues to put pressure on Swiss exports and tourism despite the inflation difference.
No celebrations for the export industry and tourism at the end of the year. The currency situation in Switzerland in recent days has caused unrest. The franc has once again risen sharply against the euro and the US dollar and is in the area of its highs. In the eyes of many experts, at least the fluctuations in the last week of the year are due to the mechanics of the foreign exchange exchange.
The super franc
The value of the euro briefly slipped to historic lows on Thursday. The continental currency currently costs 0.9267, well below 0.93 francs, after temporarily being above this mark again the evening before and early in the morning. This is the lowest level since the euro’s minimum exchange rate was lifted in January 2015. Meanwhile, the US dollar is trading at 0.8367, similar to the previous day. In the meantime it had climbed over the limit of 0.84.
The exchange rate of the euro hardly changed against the dollar on the last trading day of the year. On Friday afternoon, the common currency cost 1,1076 US dollars, about the same as in early trading. On Thursday, the euro temporarily climbed to $1.1139, its highest level since July. However, in late Thursday trading the price slipped back below $1.11.
No reason to worry
A further strengthening franc means further trouble for the Swiss export market and the tourism industry. This is particularly true for the machinery, metal and plastics industries. In contrast to the pharmaceutical or watch industries, their export markets are primarily in Germany and China, where the economy is currently sluggish.
Nevertheless, observers believe that the strong swings these days primarily represent a backlash in foreign exchange trading. Because comparatively few investors are active shortly before the end of the year, trading volumes would remain low, which could lead to unusually strong price movements.
Stock market investors are moving money at the end of the year for technical reasons, which could be behind the movement
For SRF business editor Stefanie Knoll, the current appreciation is surprising, but of manageable importance. “Stock market investors are moving money at the end of the year for technical reasons, that could be behind the movement,” is how she assesses the recent capers of the national currency.
However, this is not an all-clear for the export and tourism industry, as Knoll continues. The franc has strengthened throughout the year, which is not good news for the federal government and the cantons either. The strong national currency is weighing on the Swiss National Bank’s foreign currency portfolio. “Payouts to the cantons could – as they did this year – become a long way off next year.”
Inflation plays a role
For Knoll, the fact that the franc gained in value overall over the entire year was probably due to inflation developments in the EU and the USA. Inflation in the euro area and the USA appears to be under control, says Knoll. “Interest rate cuts are already in the air there. That puts pressure on the local currencies.”
Inflation is not only negative for Switzerland
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Inflation does not only have to be negative for the Swiss economy. Switzerland is currently benefiting from the inflation difference, as prices and wages in the USA and the Eurozone are rising much faster than in this country. If the increase in the nominal exchange rate of the Swiss franc is offset against the inflation rate, the national currency has actually been quite stable since 2015.
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