Pros and Cons of the Strong Swiss Franc Exchange RateOctober 20, 2023
Record CHF Exchange Rate
As of recently, Swiss franc has been keeping very good exchange rate versus euro, especially. Since the crisis in the Middle East has escalated, the exchange rate of Swiss franc has beaten another record versus EUR. It is now close to hitting the level of the all-time high. Last Friday, the Swiss franc’s exchange rate against the euro plummeted to 0.9457, the lowest point since September 2022. It may further go down. Foreign investors find Swiss franc a safe-haven in times of turbulent geopolitical situation with war in the Middle East and between Russia and Ukraine. CHF exchange rate is benefiting from the stable Swiss economy, low national debt or current surplus.
Benefits of Strong CHF Exchange Rate for Consumers
Consumers can benefit from cheaper travel abroad thanks to strong exchange rate of CHF. In countries like Italy, Spain, Portugal, France Swiss residents will spend less on accommodation, food, entertainment that those travelling from eurozone countries. Also shopping abroad is very convenient and cheaper. Swiss residents often travel abroad to neighboring countries like Germany, France or Italy to make cheaper shopping. Many products are cheaper abroad, and also it is possible to reclaim value-added tax on your shopping. Swiss people make shopping abroad, whereas foreigners come to Switzerland to work – cross-border workers are common thing. Swiss residents spend around 7 billion francs a year in stores abroad.
Benefits for Companies
Companies that benefit from good exchange rate of CHF are those operating in import sector. Switzerland-based companies that take goods from overseas countries can benefit from strong CHF and make more profit. Last year, Switzerland’s foreign import trade was at 341 billion Swiss francs versus over half of the imports coming from other countries in Europe, like Germany, Italy, France, Austria.
Cons of Strong CHF
Obviously there are some cons of high exchange rate of Swiss franc versus euro. In business companies that suffer are those from export sector. Some companies from the country may increase process of export goods to make up for lost money. That in turn can backfire at customers that would have to pay more for products. Another sector than can be hurt by very strong exchange rate is tourism. Due to very high prices in Switzerland, fewer tourists come to the country.