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The dollar rate is approaching a 2015 low, which is causing headaches for the Swiss export industry.
The dollar is currently very cheap against the Swiss franc. It was only cheaper in 2015 and 2011. That’s nice when you’re on vacation in the USA. But for the local export economy, this means one thing above all – price pressure.
“We’ve reached our pain threshold”
The dollar has been in a downtrend for some time. This hurts many companies, for example the Basel-based company Rego-Fix, which manufactures high-precision parts. Sales Manager Pascal Forrer explains: “We have reached the pain threshold. That presents us with a challenge.”
In order to be able to continue producing in Switzerland, for companies like Rego-Fix this means creating more efficient and more favorable production conditions.
Why is a cheap dollar bad for the export economy?
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Companies that produce in Switzerland and sell their products in the US generate income in dollars but have to settle their expenses in francs. If the exchange rate changes, the relationship between income and expenses for these companies also changes. If the Dollarkus falls without a company raising the prices of its products, the income will be lower when converted into Swiss francs. On the other hand, spending on wages in Switzerland remains unchanged in the event of a weaker dollar.
Most important export country USA
For Switzerland, the USA is the single most important export country. Almost a fifth of all exported products go to the United States.
Dollar depreciates quickly
Thomas Heller, head of investment at Belvédère Asset Management, emphasizes that the dollar is under pressure over the long term. But he too is surprised: “It is extraordinary how much the dollar has depreciated in the last few days and weeks”.
Nevertheless, Heller believes that the Swiss export industry can adapt well to a weak dollar – the past has shown that. Nevertheless: the speed of the descent in combination with the strong franc would put a strain on many companies.
Although many companies can benefit from the cheap dollar from their suppliers, this is only possible if they import them themselves.