Riding out currency swings is part and parcel of international business — but even for the more battle-hardened members of Switzerland’s watch industry, the wild gyrations that 2015 brought have been a challenge.

The most dramatic was the appreciation of the Swiss franc, which briefly surged 39 per cent against the euro in January after the Swiss National Bank ended its longstanding SFr1.20 cap against the single currency.

The Swiss franc is currently around 10 per cent stronger. However, the decline of the euro, rouble, yen and renminbi and the rise of the dollar have also contributed to watchmakers’ headaches.

“It was really an extreme event to see the Swiss franc move so much, and generally from a currency perspective it has been an extreme year,” says Luca Solca, an analyst at Exane BNP Paribas. “To me, the currency environment, with all the moves we have seen, resembles the beggar-thy-neighbour policies of the 1930s, where everyone was trying to get their currencies to depreciate.”

Jon Cox, of Kepler Cheuvreux, takes a similar line. “The lifting of the cap came completely out of the blue, and was a huge shock to Swiss watchmakers,” he says.

“When the franc went to parity with the euro it put the fear of God into the industry. Swiss watchmakers are used to dealing with the strong franc, but it was the speed of the move that was so difficult.”

The currency swings present two big problems for the Swiss watch industry. The first is that the rise of the franc has pushed up watchmakers’ costs, the bulk of which are incurred in Switzerland, in contrast to their earnings, which are in a variety of currencies.

The second problem is that the diverging currency movements have opened up gaps between the prices of the same watches in different countries. With some Swiss watches selling for hundreds of thousands of euros, even a small percentage difference in prices can create the chance — and incentive — for customers to arbitrage.

“If you are buying a SFr100,000 [$100,800] watch, it only needs to be a few per cent cheaper in another country for it to be worth your getting in a plane, flying over and buying it there,” says Mr Solca.

Of the two problems, the price differential is easier to deal with.

The response among watchmakers has broadly fallen into two categories. The first group — including brands such as Omega, Swatch and Rolex — have put prices up in Europe, but not cut them elsewhere.

Richard Mille is chief executive of the company that bears his name; it has put up its prices in euros by about 20 per cent. “I did not want a gap to develop between the US and Europe,” he says. “I decided a few years ago that we would make sure our prices were the same everywhere in Swiss franc terms.”

Not all brands have been so aggressive. On average, says René Weber, an analyst at Bank Vontobel in Zurich, brands have put up euro prices by about 8 per cent — not enough, he says, to offset the currency swings. “I think brands that have only changed their prices in euros will need another round of price increases next year.”

The second group, which includes brands owned by Richemont, the Swiss luxury group, put up prices in Europe by a similar amount, but cut prices elsewhere — particularly in the dollar area — by between 5 and 8 per cent. Cutting prices is not something that watchmakers are keen to do, as it undermines their aim of fostering an image of exclusivity. However, Mr Weber says that this year it makes sense. “The situation has been so extreme, that it is absolutely justified,” he says.

Dealing with the impact of the franc’s surge on their cost base is far harder for Swiss watchmakers. Since one of their key selling points is the fact that their wares are “made in Switzerland”, one obvious response — shifting production to cheaper locations — is not an option.

Instead, watchmakers are trying to control costs in other ways. Few comment on what they are doing. But Mr Cox says one response has been to adjust the contracts and working hours of staff.

“IWC, for example, has been getting staff to volunteer to work shorter hours. Other companies have people working more for the same pay. Some have switched staff living in Germany and France from Swiss franc to euro contracts,” he says.

Hiring has also ground to a halt — and some groups have gone further. Ulysse Nardin, the high-end brand snapped up in 2014 by the French luxury group Kering, confirmed in May that it would cut 26 jobs — or about 8 per cent of its Swiss workforce “to adapt to the needs of the market”.

Some groups have cut capital spending where possible. But not everyone sees the situation as a cause for retrenchment.

Nick Hayek, chief executive of Swatch Group, which owns brands such as Breguet, Omega and Longines, said in an interview with the Swiss economic newspaper Finanz und Wirtschaft that “continuing to invest, even when times are hard” had been “key to our success”. He shrugged off the idea that Swatch should cut its marketing spend to boost margins.

The upshot is that 2015 is likely to be a weak year for Swiss watchmakers. Exports in the first nine months are 2 per cent less than in the same period in 2014. If the trend continues, 2015 will be the first year since 2009 that Swiss exports have fallen.