Volatility on currency markets dips slightly


The volatility of exchange rates was slightly lower than in 2010 and 2009. The US dollar traded on average 5 per cent lower than in the previous year, when the euro crisis began. This benefited the Lufthansa Group in terms of expenses. The pound sterling fell by an average of 1 per cent against the euro, whereas the Japanese yen rose by 4 per cent.

The Swiss franc ended the year where it had begun. Over the course of the year it had gained more than 20 per cent against the euro, however, prompting the Swiss central bank first to intervene in currency markets and finally to fix the exchange rate at EUR 1.20.

Currency development 2011 (line chart)

In line with our currency hedging strategy, which is unchanged, we try to reduce the effects of exchange rate fluctuations on the Company’s performance by means of rule-based hedging policies. Further details can be found in the “Risk and opportunities report” on p. 122. Including these hedges, currency movements had a minor positive effect of EUR 85m on the Group’s operating result for 2011.

Currency development EUR 1 in foreign currency

 

2011

2010

2009

2008

2007

Source: Reuters, annual average daily price.

USD

1.3910

1.3239

1.3945

1.4743

1.3615

JPY

110.74

115.94

130.39

153.59

161.04

GBP

0.8676

0.8574

0.8907

0.7901

0.6807

CHF

1.2303

1.3780

1.5095

1.5896

1.643

Short and long-term interest rates move in different directions

Over the course of the year 6-month Euribor continued the upward trend that followed its historic low in the previous year: on average the rate was 51 per cent higher than the previous year. Long-term interest rates moved in the opposite direction, however. The 10-year swap rate fell to 2.4 per cent for instance. Nevertheless, on average interest rates did not change very much compared with the previous year, although interest rate volatility increased as speculation spread as to a downturn in the European economy and the continuing euro crisis.

As the Group’s operating result is positively correlated with a strong macroeconomic situation and short-term interest rates, we hold most financial liabilities at floating rates to make use of this natural hedge, see section „Liquidity, financing and interest rate risks“.