Swiss franc overheats

GENEVA  An overheated Swiss franc could have “dramatic” consequences for the country’s economy, a top official said Sunday, as the country’s business and tourism sectors braced for tumbling sales.
It will have a significant impact on tour and hotel pricing for tourists visiting Switzerland, forcing tour companies in Asia to absorb losses as costs rise.
inside no 10 The country’s already struggling tourism sector began seeing cancellations as already pricy ski resorts suddenly became far more expensive for foreign visitors.
“We are still in shock,” Juerg Schmid, head of Swiss Tourism, told the weekly Le Matin Dimanche, lamenting that the “brutal” central bank decision had “created uncertainty … on the eve of the high season.”
“The telephones have stopped ringing, and … online reservations have stopped,” he said, adding that the industry now needed to try to persuade Swiss tourists who already have francs in their pockets to stay in Switzerland this season.
That could be complicated. Armed with more purchasing power abroad, many shoppers were already heading across the border to snap up cheaper goods in neighbouring eurozone countries.
It is likely to encourage outbound travel with Swiss taking advantage of a stronger franc to buy overseas holidays.
But its inbound travel market will take a big hit as the country loses competitiveness when compared to other destinations such as France and Italy.inside no 10.2
The franc has jumped around 15% against the euro since the Swiss central bank stunned markets Thursday with its bombshell decision to abandon the minimum rate of 1.20 francs against the European common currency.
The high level of the franc is seen as a significant threat to Switzerland’s export-dependent economy, as prices for Swiss goods abroad suddenly jumped 20% overnight.
The central bank has faced a barrage of criticism, with Swiss exporters and tourism companies accusing it of sinking their business.
Thursday’s move has also been criticised abroad, where the soaring franc has wreaked havoc on markets, engulfed eastern European neighbours whose mortgage debt is denominated in the franc, and bankrupted at least two foreign exchange brokers.
inside no 10.1Central bank chief Thomas Jordan has adamantly defended the move, insisting the bank’s efforts to hold down the Swiss currency, including through buying up massive amounts of foreign currency, were no longer justified.
Swiss businesses were meanwhile bracing to see exports plunge and shoppers at home flood across to neighbouring eurozone countries for cheaper goods.
“Overall, our country has landed in a much more difficult situation,” Heinz Karrer, head of the Swiss Business Federation, told the Sonntagszeitung weekly.
“If the exchange rate stands at around parity, many Swiss export companies to will likely no longer be able to compete,” he warned.

sourced:ttrweekly.com