As the rich and powerful from across the world began descending on this Alpine resort town today, they are finding everything costlier...
As the rich and powerful from across the world began descending on this Alpine resort town today, they are finding everything costlier — thanks to an unprecedented rally in local currency Swiss franc’s valuation.
The increased valuation of Swiss franc — to its highest level in about 30 years — has led to costs moving up the slope for everything. From taxi to hotels to stay to food, cost of everything is going up for about 3,000 persons, including 2,500 business and political leaders from across the globe, who are here for World Economic Forum’s Annual Meeting.
The Swiss franc soared nearly 30 per cent last Thursday immediately after the Swiss National Bank (SNB) took a surprise decision to allow an unrestricted rally in its currency — making it the biggest one-day gain ever. After paring some of the gains, the franc still remains 20 per cent higher than its level seen before SNB’s move.
At the current levels, it requires 1.15 US dollars, plus foreign exchange charges, to purchase one Swiss franc, while the exchange rate is Rs 71 for Indians coming here.
In comparison, it required 0.98 US dollars for one Swiss franc a week back, while the exchange rate for Indian rupee was Rs 61 only. For euro, the exchange rate was 0.83 per Swiss franc, while the two currencies have now become kind of equals in terms of valuation.
The Swiss franc has turned costlier in comparison to the last year’s WEF meeting at Davos as well, when it required 0.81 euro for one Swiss franc, while the exchange rate for the US dollar was 1.01 and for the Indian rupee at about Rs 68.
The increased currency valuation has further added to as such high expenses involved with the WEF meeting, which makes the hotels and other amenities and services much costlier in this otherwise secluded town — only frequented by the skiing enthusiasts coming to the slopes of Swiss Alps mountain range.
Among others, more than 100 business leaders from India are here for this year’s WEF summit, while the total number of Indians presently in this small town would be 250-300.
In a surprise decision on January 15, SNB announced that it is discontinuing with the the minimum exchange rate of CHF 1.20 per euro.
Interestingly, the fixed exchange rate regime was one of the factors adding to Switzerland’s ‘safe haven’ tag, as it assured the investors that their money would be safe.
Besides, SNB has lowered interest rate on sight deposit account balances that exceed a given exemption threshold by 0.5 percentage points, to minus 0.75 per cent — heralding a negative interest rate regime.
The minimum exchange rate was introduced during a period of exceptional over-valuation of Swiss franc and an extremely high level of uncertainty on the financial markets, SNB said, while adding that the “exceptional and temporary measure protected the Swiss economy from serious harm”.
“The euro has depreciated considerably against the US dollar and this, in turn, has caused the Swiss franc to weaken against the US dollar,” it said, while adding that the SNB has concluded that enforcing and maintaining the minimum exchange rate for the Swiss franc against the euro is no longer justified.