ZURICH: The strong Swiss franc is proving a burden for nearly half of Swiss companies surveyed, the Swiss National Bank said in its quarterly report, a result little different from a survey three months ago despite a further rise in the currency.
The franc, seen as a safe haven, has repeatedly hit record peaks against the euro and the dollar this year, on concerns about the euro zone debt crisis and sluggish US economic growth, building on its double-digit appreciation against both currencies in 2010.
The Swiss National Bank(SNB), the central bank, has warned economic growth will slow to around 2 percent this year, from 2.6 percent last year, as exports suffer. Swiss companies selling goods abroad have warned their margins are under pressure and may have to transfer production overseas.
In a quarterly survey of 210 companies across sectors taken in April and May, nearly half of respondents said they were burdened by the strong franc, little changed from a similar survey in March.
"There was little or no change in the results compared to the previous quarter, despite a further intensification in the exchange rate situation since the last survey," the SNB said in its quarterly report, which published the survey.
Among manufacturing companies, however, the proportion of firms feeling significant negative effects rose to 58 percent from 51 percent in March, the SNB said, adding that in many cases the strong franc was causing profit margins to sink.
"The problem seems to have worsened in those areas where it already existed," the SNB said.
Companies burdened by the unfavourable exchange rate reported having resorted principally to lowering production costs. Other steps taken included raising prices abroad, slashing jobs, implementing currency hedges and moving production abroad, the survey found.
Across sectors, 24 percent of respondents reported significant negative effects from the strong franc and another 24 percent said the ill effects were moderate, with export activities worst hit. That was little changed from the previous survey, released in March, when 47 percent of firms reported being hit.
As in the previous report, 37 percent said they were feeling no effect while 15 percent reported a positive boost.
"There was little or no change in the results compared to the previous quarter, despite a further intensification in the exchange rate situation since the last survey," the SNB said.
The survey was prepared for the SNB's monetary policy review on June 16, when the central bank left interest rates unchanged and issued a dovish outlook.
The sectors suffering under the strong franc included chemicals, metals, producers of electronics equipment and precision instruments, the report found.
Copyright Reuters, 2011
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