The Swiss franc is finally loose. After the Swiss National Bank (SNB) stopped imposing a fixed exchange rate on January 15, 2015, the value of the euro as opposed to the Swiss franc has fallen remarkably.
For a brief period, the euro could be bought for a paltry 0.90 centimes. Rates have since climbed back to around 1.05 francs per euro. That is still a major difference from the 1.20-franc rate previously imposed by the SNB.
The sudden strengthening of the franc caused alarm in the Swiss tourism sector and among export-based industries. Imported goods and holidays abroad, on the other hand, are becoming cheaper.
However, consumers only profit from the stronger franc if merchants pass on import savings in the way of lower prices.
An increasing number of Swiss retailers are doing just that by taking advantage of the stronger franc to market special price reductions. This is especially true for products and services for which price differences are obvious.
Car dealers have been some of the first to act. 18% euro-rate discounts are being offered for a Mercedes Benz. AMAG is offering euro discounts on used vehicles and more attractive leasing conditions.
Grocery prices have also been effected. For example, Coop has lowered the price tags of many imported goods – and proudly displays price changes in stores. Import discounter Aldi has cut the costs of around 200 products, including alcohol. Denner has discounted beverages by as much as 18 percent.
A gradual decline in electronics prices is also apparent. Interdiscount, for example, has lowered prices on certain items by 15%-20%. Online retailer Brack has discounted over 10,000 products.
The textile trade has also been booming, with ever more clothing strores cutting prices on brand-name clothing on account of lower euro rates.
Some retailers have advertised that discounts are only available as long as the franc remains strong. If the franc weakens against the euro, these retailers will revert to the previous pricing.
Many currency experts expect the franc to weaken as early as this year. Some believe the rates may drop to the old rate of 1.20 francs to the euro. Other experts believe that a further strengthening of the franc, even as far as a rate of 0.90 centimes per euro, is still possible.
There is no way to accurately predict for sure whether the franc will strengthen or weaken. At this point, rates could easily sway either way, or hover around the current 1.05 francs per euro. If rates stabilize above the previous franc-to-euro standard rates, consumer should continue to enjoy discounts.
Suggestion: If an imported item you want is still being sold at its pre-January 2015 price, ask the merchant about possible rate-based discounts.
The moneyland.ch team