Switzerland’s Currency Paradox: How the World’s Strongest Franc Still Powers Export Growth

A currency that just won’t weaken

Since Bretton Woods collapsed the Swiss franc (CHF) has appreciated against every major currency. Measured on the BIS real effective exchange-rate index, the CHF now sits 3 % above its (already lofty) 2020 level and trades around USD 0.82 – its strongest print since April 2025.

Yet exports keep hitting new highs

Conventional textbooks say a stronger FX rate prices exporters out of world markets. Switzerland disproves that:

Metric	Latest datapoint
Exports of goods & services	75 % of GDP
Share of global exports	≈2 % – remarkable for an 8.9 m-person country
Manufacturing value-added	18 % of GDP (higher than any G7 member)
High-tech content	29 % of manufactured exports – c. 1.6× the US ratio

Why the strong franc doesn’t bite

1. Product complexity & pricing power – Harvard’s Growth Lab puts Switzerland #2 globally and #1 among large economies for export complexity.

2. Productivity – Output tops USD 100 per hour worked, vs c. USD 85 in the US and USD 67 in the UK.

3. Sector mix – Pharma, med-tech, precision machinery and luxury goods enjoy inelastic demand curves; buyers absorb FX moves to secure “Swiss quality”.

4. SME dynamism – 99 % of companies are small, forcing continual innovation and niche specialisation.

In short, Swiss corporates sell value-added, not price-sensitive volume. A firm that embeds IP, regulation or branding moats can pass on currency appreciation just as easily as rising input costs.

Macro buffers investors should note

• Current-account (CA) surplus: Averages 8 – 9 % of GDP, recycling FX earnings into global assets.

• Net international investment position (IIP): +CHF 1.04 tn – c. 110 % of GDP. A war-chest for shock absorption.

• Private-sector leverage: Core risk – credit to households & firms sits near 270 % of GDP, one of the highest in the OECD.

• Concentrated banking system: Post-2023 UBS–Credit Suisse merger leaves a single behemoth; OECD flags systemic risk.

My read: the fat IIP and CA surplus cushion shocks, but elevated household leverage and “too-big-to-fail²” banking mean a sharp housing correction could still sting equity investors.

Lessons for policy-makers debating devaluation

• FX is a symptom, not a cure. Trying to “engineer” a cheap currency often masks deeper competitiveness issues – poor skills, under-investment, weak infrastructure.

• Compete on quality, not wage cost. Switzerland proves that REER appreciation can coexist with export growth when firms upgrade along the value chain.

• Stable institutions matter. Decentralised fiscal federalism, robust apprenticeship schemes and predictable regulation lower country risk premia – exactly the opposite of the beg-gar-thy-neighbour uncertainty that follows deliberate devaluations.