It may be useful to look at the big picture when assessing the current movements in the Swiss Franc (CHF). Since the beginning of 2020, the CHF has appreciated by almost 15% against the Euro and by more than 18% against Switzerland's trading partners, Commerzbank’s Head of FX and Commodity Research Ulrich Leuchtmann notes.
No evidence of excessive CHF strength
“18% appreciation does not burden Swiss exporters or those Swiss companies that compete with imports. At least not significantly. This is because the CHF's performance is hardly more than an expression of the fact that Switzerland was almost the only economy to largely escape the global inflation shock.”
“Yes, inflation in Switzerland also rose somewhat as a result of the pandemic. At its peak, the Federal Statistical Office recorded a price increase of 3.5% (compared to the previous year, in August 2022). But that was nothing compared to what was recorded elsewhere: 9.1% in the USA, 10.6% in the eurozone, 11.1% in the UK, etc.”
“But if the internal purchasing power of other currencies eroded faster, it is only logical that their purchasing power on the foreign exchange market also eroded against the franc. Adjusted for these inflation differences, the NEER becomes the real effective exchange rate (REER). In the same period, it increased by only 4.6% – almost exactly the same as the REER of the Euro. This means that, apart from the fact that Switzerland has largely escaped the post-pandemic inflation shock, there is no evidence of excessive CHF strength.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD holds on to gains above 0.6600 as risk appetite rules
The AUD/USD pair holds on to recent gains and trades above the 0.6600 mark as encouraging US data boosted the mood. RBA Governor Michele Bullock due to testify before Congress.
EUR/USD settles below 1.1000 after upbeat US news
Optimism was not enough to support the Euro. Better-than-anticipated US data spurred risk appetite and sent Wall Street higher. EUR/USD however, dipped to 1.0950, bouncing just modestly amid modest USD demand.
Gold holds on to modest gains above $2,450
Gold trades in positive territory above $2,450 in the American session on Thursday after dropping toward $2,430 with the immediate reaction to the stronger-than-forecast US data. The benchmark 10-year US yield is up more than 2% on the day above 3.9%, capping XAU/USD's upside.
Ethereum's supply rises by over 210,000 ETH amid Vitalik Buterin's charity donation
Ethereum (ETH) is down 0.7% on Thursday following three consecutive days of net inflows across ETH ETFs. Meanwhile, ETH's annual inflation rate has continued trending upward amid signs of a potential bullish reversal.
Dollar and risk appetite rise on upbeat data
Weak macro data in early August triggered a simultaneous sell-off in equities and the dollar on fears of an economic meltdown. Over the past ten days, however, several important statistical releases have changed expectations.