The dollar has weakened significantly and is currently at a multi-year low at just over 86 centimes – a year ago it was more than 97 centimes. SRF business editor Susanne Schmugge knows more about the reasons and possible consequences.
Susan Schmugge
journalist
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Susanne Schmugge is a business editor at SRF. She studied history with a focus on economic history and social sciences and has been working at Radio SRF since 2008.
Why has the dollar depreciated?
The latest inflation figures were announced on Wednesday: According to them, annual inflation in the USA fell from four percent in May to three percent in June. This sharp decline was not expected. Falling inflation could mean that the US Federal Reserve is unlikely to raise interest rates much more in the near future. Lower interest rates than expected, in turn, make it less attractive for investors to invest their money in the dollar area – which leads to a weaker dollar.
What does this mean for the Swiss franc?
As always in times of crisis, the Swiss franc is in demand among investors worldwide – because the franc is considered a safe haven. Accordingly, the exchange rate against the dollar has risen. However, the dollar has also recently lost value against the euro – precisely because of the falling inflation figures, which are actually positive for the USA. However, it is difficult to say whether the Swiss franc will continue to appreciate against the dollar in the near future. What is certain, however, is that the dollar has been steadily weakening for decades: for example, in February 1985, 1 dollar was still almost 3 francs – today it is just over 86 centimes.
What consequences does this have for the Swiss economy?
Tourism and the export industry usually do not enjoy a strong franc. Because then holidays in Switzerland will be more expensive for foreign guests. Likewise, export goods from Switzerland are becoming more expensive for buyers abroad – which can mean lower sales. After all, the euro area is more important for the Swiss export economy than the USA.
What does the weak dollar mean for consumers?
Traveling in the USA is becoming cheaper for Swiss people. However, flight prices in particular do not react very quickly to currency fluctuations. The cost of flying to the USA is likely to remain comparatively high for the time being, while staying there tends to be cheaper.