Currency Risk for CHF Investors
Why holding assets in a foreign currency exposes Swiss investors to exchange-rate swings, how the strong franc has eroded dollar returns over time, and when hedging is worth it.
Key idea
What matters to a Swiss investor is what a foreign asset is worth in francs, the currency you spend: when the franc strengthens, a holding can rise in dollars and still lose ground in CHF. Hedging removes that swing but costs about the gap between the two currencies' interest rates. So long-term share investors usually accept the swings, and hedging makes most sense for bonds and for money needed within a few years.
What it is
Currency risk is the effect of exchange-rate moves on the CHF value of assets you hold in another currency. If you own a US index fund, your return has two parts: how the fund performs in dollars, and how the dollar performs against the franc. The second part is invisible on a US brokerage statement but very real once you convert back to spend the money at home.
One year, two moves
Take CHF 10,000 put into a US fund for one year, at an exchange rate of 1 USD = CHF 0.80. The rate is an example:
At the start
- Fund
- USD 12,500.00
- Rate
- 1 USD = CHF 0.80
- In francs
- CHF 10,000.00
Fund +8% in dollars
Dollar −5% against the franc
One year later
- Fund
- USD 13,500.00
- Rate
- 1 USD = CHF 0.76
- In francs
- CHF 10,260.00
The CHF 10,000 buys USD 12,500.00 of the fund. A year later the fund has gained 8%, to USD 13,500.00, but the dollar has lost 5% against the franc, from CHF 0.80 to CHF 0.76. In francs the fund is now worth CHF 10,260.00: a gain of 2.6%, not 8%, because 1.08 × 0.95 = 1.026. Had the dollar risen 5% instead, to CHF 0.84, the same fund would be worth CHF 11,340.00, a gain of 13.4%. Nothing about the fund itself caused the difference.
Why it matters more for the franc
Over the decades the franc has risen a long way against the dollar. On 4 January 1971 a dollar cost CHF 4.3180; on 9 October 2026 it cost CHF 0.8308, according to the US Federal Reserve. In francs, the dollar lost 80.76% of its value. A Swiss investor holding dollar assets has therefore faced a long-run headwind that a US investor never sees in their home currency.
This doesn't make foreign investing a mistake: global diversification is still valuable. But every foreign holding comes with a second source of ups and downs, the exchange rate, and against the dollar the long-run trend has worked against franc investors.
What you can do about it
Three broad responses, from cheapest to most active:
Accept it
Holding assets in many currencies spreads the swings out. Many diversified investors simply ride them.
Hedge it
CHF-hedged fund share classes strip out the currency move, for an ongoing cost, and you give up any gains too.
Tilt home
Hold a larger share in CHF assets, so more of your portfolio already sits in your spending currency.
A hedged share class is a version of the same fund that fixes the exchange rate ahead of time with forward contracts, agreements to swap currencies later at a rate set today. Its cost is roughly the gap between the two currencies' short-term interest rates. On 9 October 2026, dollars lent overnight earned 3.87% (SOFR, published by the New York Fed) and francs −0.04% (SARON, as recorded by the Swiss National Bank), so hedging dollars into francs cost about 3.9% a year. That's why hedging makes most sense for shorter horizons or bond-heavy holdings, where currency swings can dwarf the underlying return. For long-term stock holdings, accepting the currency swings as part of diversifying is the cheaper choice.
The honest caveat
Hedging isn't free, and it removes the upside as well as the downside. That matters because currencies don't move one way: on 2 January 1980 a dollar cost CHF 1.5775, and on 11 February 1985 CHF 2.7950, a rise of 77.18% for anyone holding dollars. Nobody knows which way the next decade will go, which is why neither hedging everything nor hedging nothing is a sure bet.
Swiss note
A fund's trading currency isn't the same as its currency risk. A US-domiciled ETF priced in dollars but holding global companies exposes you to many currencies, not just the dollar. The reverse holds too: a fund of US shares bought in francs on SIX still carries the dollar risk, unless its share class is hedged into francs. What matters is the currencies of the underlying assets, not the ticker's listing currency. Check your fund's factsheet to see which countries and currencies it invests in.
Key takeaways
- —Your real return is the asset's return plus the currency move, measured in the francs you spend.
- —Against the dollar, the rising franc has been a long-run headwind: from 1971 to 2026 the dollar lost 80.76% of its value in francs.
- —Hedging removes the currency swing but costs money and cuts off the upside as well as the downside.
- —What counts is the currency of the underlying assets, not the currency a fund is priced in.