Switzerland cheaper thanks to strengthening of the dollar
It happened rather unexpectedly and just in time for the coming tourist season: After years of sliding the dollar has suddenly strengthened against most other currencies. It has regained a little of its former respect on the streets of Vienna, Frankfurt, Paris, and Bern where even the Swiss have complained that their franc has been "far too strong for far too long."
Put another way, in the months ahead the American visitor will find that his lodging, his meals, and his entertainment in Europe will cost him just a little less than last year in terms of his own dollars, if not in the currency of the land he is visiting.
The Swiss are particularly delighted at this turn of events. Their high flying franc has been limiting their exports for years. And, when the Swiss refer to exports, they also mean tourism, which has traditionally been a substantial foreign currency earner.
High interest rates here in the US are the principal reason behind the strengthening dollar. Overseas investors pour money into the US to earn some of that interest and the dollar is boosted accordingly. The feeling that the Reagan administration will not vacillate in its attack on inflation is also a contributory factor.
Compared with a year ago the Swiss franc has come down 21 percent against the dollar. Put another way, if your hotel room in Zurich costs the same number of francs today as it did a year ago, it will cost you 21 percent less in your US dollars right now. The same applies to your meals, bus ride, and your ticket to the opera. Be aware, however, that inflation has finally hit the hitherto inflation-proof Swiss economy. Prices there rose last year by --then, Swiss prices will have fallen by approximately 18 percent for dollar earners. On the other hand, if your salary kept even marginally close to inflation here, you will find your Swiss vacation even more affordable this year.
The dollar has improved against most other European currencies by similar or better margins: The French franc for instance has dropped 25 percent against the dollar, the Italian lire by 29 percent. In contrast the pound remains strong, bolstered by that pool of oil sitting off Britain's north shore. The Japanese yen has likewise strengthened against the dollar in the past 12 months.
I once had lunch with a Swiss businessman who bitterly lamented the decline of overseas currencies relative to the franc. He was particularly bothered by the dollar's drop in value because it was hitting hard at his export of precision machine parts to the US. "I work very hard to hold my prices in line here," he said. "Then the dollar drops in value so the cost of my products in the US goes up. All my hard work is for nothing."
That Swiss exporter will be delighting in the strengthened dollar. The 21 percent drop in his dollar costs to Americans will give him a competitive edge again. The same can be said for Swiss tourism, which is an "export" every bit as mush as machine parts, chemicals, or watches. The disciplined Swiss hotel and restaurant industry, which has held the line against inflation so well over the years will now benefit from such sustained discipline. American tourists, with their strengthened dollars, and the British with their more powerful pounds , should find Switzerland, if not a bargain, at least a good buy.
A word of advice from a company whose sole business is dealing in foreign currency, including gold: Watch the prime interest rate here. "If it begins to fall," says Katherine Hoss, director of marketing for Deak Perera, a Wall Street company, "the dollar is likely to drop with it." In other words, if you know you will be in, say, Geneva, sometime in the fall and the prime interest rate begins to drop in July, buy your Swiss francs immediately. You may have to keep them in your safety deposit box for three months but you will have more of them for dollars spent when you finally take off for Europe.
Experienced travelers generally advise against taking dollars to a foreign country. It's better to arrive there with the currency of the land already in your pocket. This way, you won't lose heavily when the taxi driver discounts your dollars at way above the going rates on the ride from the airport to your hotel. You would probably lose out, too, exchanging dollars at the hotel. If you do arrive only with US dollars, exchange them at a foreign currency exchange booth at the airport or at banks with clearly marked currency exchange counters.
Take credit cards by all means, but avoid using them as long as you have available currency. This is because exchange rates can vary between making your purchase and the time when the credit card company processes your bill.
Buy foreign money here at banks or from foreign currency traders. Trading in coin as well as notes, Deak Perera also buys back coins (at 60 percent of face value), something banks will not do at all.