[ZURICH] Swiss exporters including Swatch Group AG and Richemont slumped in Zurich trading after the central bank's decision to scrap its cap on the currency saw the Swiss franc jump more than 14 per cent against the dollar and euro.
"Today's SNB action is a tsunami; for the export industry and for tourism, and finally for the entire country," Swatch Group AG Chief Executive Officer Nick Hayek said by e-mail. "Words fail me." Holcim, the world's biggest cement maker, slid as much as 21 per cent. Watchmakers Cie. Financiere Richemont SA and Swatch tumbled more than 9 per cent. The benchmark Swiss Market Index dropped as much as 8 per cent, the biggest intraday decline since October 2008.
A strong franc is a serious challenge for exporters like Swatch and small- and mid-size companies with factories in Switzerland, where shop-floor workers earn some of the highest wages in Europe. Timepieces make up more than a 10th of the country's total exports, led by brands including Rolex, Swatch's Omega and Richemont's Cartier.
The Swiss franc surged as the Swiss National Bank unexpectedly removed the cap of 1.20 francs per euro, concluding that it was no longer justified. That ended a three-year-old policy designed to shield the economy from the euro area's sovereign debt crisis.
"We are an export-oriented business," said Andrew Weiss, a spokesman for Allschwil, Switzerland-based Actelion Ltd., Switzerland's third-biggest drugmaker. "We have a certain amount of revenues that come from the US Together with the European revenues that will be under pressure." Currency Pressure The Swiss watch industry was already reeling from what probably will rank as the second-worst annual performance since 2009. Full-year data isn't out yet, but exports of Swiss watches rose 2.3 per cent in the first 11 months of 2014, decelerating from a growth rate that peaked at 22 per cent in 2010.
Pressure on the cap increased in recent months as speculation the European Central Bank was preparing a program of bond buying, or quantitative easing, weakened the euro. The SNB also cut its interest rate to minus 0.75 per cent.
SNB President Thomas Jordan will hold a briefing at 1:15 pm in Zurich today.