How strong is the franc really? – Commerzbank

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.”