Swiss Franc exchange rate - thoughts?
Discussion
I'm thinking of making a big car purchase (rather not say what unless it happens but will bore you with details and pictures if it does!)
However, one of my concerns is the exchange rate. Currently the prices in Swiss Francs and Euros/Sterling of the car in question are about equal. That means that if I buy and then leave Switzerland and take the car with us then I should be able to get my money back (if I need to sell it). But at the moment the Swiss Franc is being devalued by the SNB. If left to float it would probably reach parity with the Euro and drop to around 1.25 against Sterling.
Does anyone have any insight into what is going to happen to the exchange rate? The SNB have been intervening for some time but can that last indefinitely?
My wife has sort of accepted the purchase - or rather - she has called my bluff on the "blokeconomic" arguments I used, that the car is an investment and should hold its value or increase: she says I can go ahead but if I lose a lot of money....
However, one of my concerns is the exchange rate. Currently the prices in Swiss Francs and Euros/Sterling of the car in question are about equal. That means that if I buy and then leave Switzerland and take the car with us then I should be able to get my money back (if I need to sell it). But at the moment the Swiss Franc is being devalued by the SNB. If left to float it would probably reach parity with the Euro and drop to around 1.25 against Sterling.
Does anyone have any insight into what is going to happen to the exchange rate? The SNB have been intervening for some time but can that last indefinitely?
My wife has sort of accepted the purchase - or rather - she has called my bluff on the "blokeconomic" arguments I used, that the car is an investment and should hold its value or increase: she says I can go ahead but if I lose a lot of money....
Edited by Schnellmann on Thursday 23 August 09:16
Quite a few thoughts on this but am on my phone at the moment. Will try and post something more in depth later.
What are your thoughts on the Euro is the key question for me. The SNB can afford to keep the cap in place until there are signs of structural inflation. Currently we are in a minorly deflating environment (not that I can say I've noticed it!). My opinion on the cap is that the SNB put it in place as a wait an see policy with the Euro - a short term measure waiting for the euro zone to get its act together one way or another. This is taking longer than expected as the politicians repeatedly kick the can down the road. Ultimately it can only fail IMO. How to define failure though? The Greek's are going to leave. I don't think this will end the debate and the Euro will remain weak until the rest of the PIIGS are sorted. If the Germans leave or a northern Euro currency bloc forms that IMO will be stronger than the CHF and will attract capital out of CH.
The news out of the uk always seems to be bad. GBP has had recent gains against the Euro but seems to have stabilised. It now seems to be a case of the lesser of two evils for someone picking between the two, which is keeping the rate in equilibrium at the moment. Meanwhile the USD strengthens...
What are your thoughts on the Euro is the key question for me. The SNB can afford to keep the cap in place until there are signs of structural inflation. Currently we are in a minorly deflating environment (not that I can say I've noticed it!). My opinion on the cap is that the SNB put it in place as a wait an see policy with the Euro - a short term measure waiting for the euro zone to get its act together one way or another. This is taking longer than expected as the politicians repeatedly kick the can down the road. Ultimately it can only fail IMO. How to define failure though? The Greek's are going to leave. I don't think this will end the debate and the Euro will remain weak until the rest of the PIIGS are sorted. If the Germans leave or a northern Euro currency bloc forms that IMO will be stronger than the CHF and will attract capital out of CH.
The news out of the uk always seems to be bad. GBP has had recent gains against the Euro but seems to have stabilised. It now seems to be a case of the lesser of two evils for someone picking between the two, which is keeping the rate in equilibrium at the moment. Meanwhile the USD strengthens...
I guess that at the price you're likely to be looking at the car will always have a global parity unless there are import / export restrictions.
Switzerland is an export-led country and the SNB action is to help exporters, which account for a big part of the economy. The political pressure seems to have been for the 1.2 level to increase. If the Euro collapses I'm not sure anyone knows what will happen as the SNB tends to keep things close to its chest.
These questions would probably apply to whichever way you want to invest (given a global price level), albeit a car would be less liquid than some forms.
What might steer the price of the car even more is the confidence of potential buyers.
Switzerland is an export-led country and the SNB action is to help exporters, which account for a big part of the economy. The political pressure seems to have been for the 1.2 level to increase. If the Euro collapses I'm not sure anyone knows what will happen as the SNB tends to keep things close to its chest.
These questions would probably apply to whichever way you want to invest (given a global price level), albeit a car would be less liquid than some forms.
What might steer the price of the car even more is the confidence of potential buyers.
Well, with sterling going at todays's rate (tendency upwards), my Ultima build project is costing me 20% more than when I started adding the columns in my spread sheet. Also, you should see the penaly tax I will have to pay with the new CO2 law which came into force on July 1st this year...
AndrewD said:
If you've got the chufs sitting in the bank what additional fx exposure are you worried about?
Say the value of the car is currently CHF 100 / Euro 83 / £67. That is at the surpressed exchange rate of 1.2 CHF/Euro. If the SNB stopped undervaluing CHF by buying foreign currencies then the exchange rates would probably go to something like 1.0 CHF/Euro (of course I don't know that - but it was heading that way before the intervention). If that happened the global value of the car would still be Euro 83 / £67 but at the new exchange rate it would be just CHF 83, so I would have lost CHF 17, as opposed to keeping the CHF 100 in the bank (where it would be worth Euro 100 / £80).Of course, what happens with the currencies is uncertain. But I know the Swiss Franc is currently undervalued as the SNB is having to intervene every day to keep the rate down so I think it is more likely that the Franc will increase in value.
It just undermines the logic of my argument to my wife. It was a huge concession on her part to say yes and I don't want it to blow up in my face as future purchases will be more difficult. More importantly (and god knows why!) she actually has faith in me and my judgement so don't want to let her down.
You could be right.
I know that there was a general realignment of car prices in Switzerland for the drop of the Euro from 1.5 to 1.2. But whether that would apply to rarely sold, collectible cars is more difficult to say.
Just something I'm trying to factor in to the buying decision.
I know that there was a general realignment of car prices in Switzerland for the drop of the Euro from 1.5 to 1.2. But whether that would apply to rarely sold, collectible cars is more difficult to say.
Just something I'm trying to factor in to the buying decision.
AndrewD said:
If you've got the chufs sitting in the bank what additional fx exposure are you worried about?
Yes I do have the chufs (I assume that means CHF's) and when I started adding the columns of my spread sheet the ROE was around 1.20 - 1.25 and today it moves around 1.50 - 1.53 so it does make a difference to the bottom line. I have even convinced and obtained approval from the Missus by calculating the project at 1.60, so anything less when I pull the trigger will be more cash for some extra goodies modified and completed post
Edited by UltimaCH on Friday 24th August 13:16
It's more likely to increase against the pound, but you may be waiting 6 month, or 3 years, or never, so don't put your life on hold for this.
One way to get a good bargain is to buy a uk vat qualifying car and save yourself a large chunk off the base price. If you do this, I have some recent experience and just pm me if you want info.
By the way, what are you buying?
One way to get a good bargain is to buy a uk vat qualifying car and save yourself a large chunk off the base price. If you do this, I have some recent experience and just pm me if you want info.
By the way, what are you buying?
I purchased an Ultima Can-Am which was delivered last Wednesday. It's sitting in my workshop until after Christmas before I start the build.
FB diary here: http://www.facebook.com/UltimachCanAmBuild
FB diary here: http://www.facebook.com/UltimachCanAmBuild
Ginos said:
It's more likely to increase against the pound, but you may be waiting 6 month, or 3 years, or never, so don't put your life on hold for this.
One way to get a good bargain is to buy a uk vat qualifying car and save yourself a large chunk off the base price. If you do this, I have some recent experience and just pm me if you want info.
By the way, what are you buying?
Curious to hear your thoughts on why the SFr will get stronger against the pound...One way to get a good bargain is to buy a uk vat qualifying car and save yourself a large chunk off the base price. If you do this, I have some recent experience and just pm me if you want info.
By the way, what are you buying?
phelix said:
Curious to hear your thoughts on why the SFr will get stronger against the pound...
I should have said - in my opinion and what would I know. No one knows. I was purely going on the Swiss bank's deliberate efforts to weaken the chf and peg it at 1.2 to the euro...which can't last forever, and when they stop, it will go up. But again, just my opinion.What are you thinking?
Not sure my opinions are worth the paper they're printed on...
I do wonder about Swiss property prices - how long can they continue to climb? More and more articles suggest that a correction is likely. Not a crash as the economy is fundamentally sound.
And the SFr vs the euro - it does seem that the SNBs's underpinning of the forex rate can't go on for ever but there seem to be no signs of that letting up. But then again any policy change isn't going to be publicised in advance.
So there's my wisdom - a bargain at twice the price.
I do wonder about Swiss property prices - how long can they continue to climb? More and more articles suggest that a correction is likely. Not a crash as the economy is fundamentally sound.
And the SFr vs the euro - it does seem that the SNBs's underpinning of the forex rate can't go on for ever but there seem to be no signs of that letting up. But then again any policy change isn't going to be publicised in advance.
So there's my wisdom - a bargain at twice the price.
The problem is that Switzerland is a toy country with a boutique currency. I am not sure if or when the correction will happen. Too many rich people from new markets want in. The property in some parts of Switzerland continues to apreciate because everybody wants to park their money here.
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