Exchange Rates and Capital Market Instruments – Analysis Based on the Example of Switzerland before and during the Covid-19 Pandemic

Abstract

The purpose of the article. The aim of the article is to present factors influencing foreign exchange rates and to examine the relationship between them and stock and bond indices in Switzerland in the period before and during the COVID-19 pandemic. The hypothesis that the studied relationships changed as a result of the turmoil caused by the pandemic crisis was verified. Methodology. To verify the hypothesis, linear and non-linear functions were analyzed, and Pearson's correlation indices between the examined instruments were calculated. Results of the research. As a result of the analysis, it was found that the relationship between the CHF exchange rate index and stock indices is non-linear, and the relationship between the CHF exchange rate index and bond indices is linear. Correlation coefficients before the pandemic indicated strong relationships between the CHF exchange rate index and the examined capital market indices, and moreover, the relationship with stock indices was positive and with bond indices negative. It was found that during the pandemic, the correlation with bond indices changed and became positive. The motivation of the analysis is related to the spotlight on a Swiss franc as a result of numerous financial decisions related to this currency.