Question

A dollar appreciation against the Swiss franc is no guarantee that the dollar will "go further” than it previously did in acquiring Swiss goods. Do you agree? Explain.

Answer 1

Yes i agree with the above fact. Swiss Franc gained its value through the grand feature of neutrality. It is rated as sixth highest trading currency among all the currencies in the world. And also stability of Swiss economy is the major factor of the stable value of its own currency. During recession period from 2008 to 2010, the exchange currency value of the Swiss franc did not fluctuates because of the policy of central bank of Switzerland country. It clearly states that the currency value will not depreciate while trading with the goods and services of the other countries with related to balance of payments. This is due to the zero effect of inflation. The Central Bank of Switzerland always controls in the inflationary pressure mounting beyond the price level which in turn affects the price level of the domestic market.

It will actually favors the import and export of goods and services between the US goods. In some cases, even though the dollar value rises every year because of its global usage, when its is used to buy and sell the goods in the domestic market of Switzerland, the value of dollar currency is been stabled under certain equilibrium point where the value of Swiss Franc and US dollar meet at own comfortable value of point in which acquiring Swizz Goods. At this point, US nation not need to pay according to value of its own currency which is appreciated more than the currency of the Swizz Franc at certain period. In this stable inflation level, US country procures the good of Swiss market without paying very less for it accordingly with the exchange value of the currency.