Currently, the Swiss Franc (CHf) is stronger than the U.S. Dollar (USD), an aspect that is attributed to the European debt crisis and the varying monetary policy in the U.S. Notably, 1 Swiss Franc can purchase $1.10, making it a stronger currency than the U.S. dollar. From this realization, any changes on the U.S. dollar will have a minimal impact on the value of the Swiss Franc because of its ability to purchase more U.S. dollars than before. However, if the Swiss Franc depreciates in value, the U.S. dollar will buy more of its currency because of the increased purchasing power that equips the dollar with more power than the Franc in the global foreign exchange context.
Currency depreciation has far-reaching economic implications that transcend beyond the ability to purchase goods and services in the business environment. In many instances, when a currency appreciates, the demand for it in the market increases (Nakatani, 2017). However, when it depreciates, it loses value against multiple currencies with which it is being traded against. In this regard, a weaker Franc will provide consumers with an opportunity to purchase different commodities. Likewise, individuals will receive more Francs for every dollar sent to them.
The Franc’s value depreciation will not only increase Swiss’s balance of trade but also convert foreign goods and services into invaluable commodities because of their high cost. In this regard, currency depreciation has far-reaching effects on the economy because of its ability to influence the consumer purchasing power and other aspects that influence outcomes in both domestic and global business environment. Given the ability of consumers to purchase more items following the depreciation in value for the Franc, there is a need to observe the measures that should be considered when implementing different economic aspects.
Nakatani, R. (2017). The effects of productivity shocks, financial shocks, and monetary policy on exchange rates: An application of the currency crisis model and implications for emerging market crises. Emerging Markets Finance and Trade, 53(11), 2545-2561.