Safe haven – but a strong Swiss franc can hurt the country’s exports.
Keystone / Ennio Leanza
The Swiss National Bank must do something fast to keep the franc’s strength from hurting exporters, according to the country’s biggest lobby group for manufacturers.
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The sudden appreciation in the currency is threatening a vulnerable recovery for overseas sales seen in recent months, Swissmem said in a statement on Wednesday.
“The Swiss National Bank is called upon to act quickly within the scope of its mandate,” it said. “The SNB has the leeway to prevent or cushion any future shock appreciation using the instruments it considers best.”
The group didn’t offer a view on what tools the central bank should deploy. While Swiss officials previously used currency interventions to keep a lid on the franc, they have prioritised interest-rate cuts this year to avoid bloating their balance sheet.
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The franc has surged some 4% since mid-July amid a global unwinding of carry trades and flows into the haven currency. It traded at CHF0.939 per euro on Wednesday morning.
After faring better than peers during the energy and inflation crises, Switzerland’s economy is struggling to gain traction amid weak export demand. A purchasing managers index of manufacturing has been stuck below the threshold signaling growth since the start of 2023.
The SNB has cut rates twice and is expected to do so again next month. Already before this week’s franc surge, economists had pointed out that its real exchange rate had rebounded to the level seen before the central bank’s last move, adding to the case for policymakers to consider more reductions.
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