You Note That Over the Last Five Years, the Swiss

Essay

You note that over the last five years, the Swiss franc has appreciated from Sfr 1.60/$1 to Sfr 1.45/$1. During that same period, the U.S. consumer price index rose from 100 to 120 and the Swiss consumer price index rose from 100 to 105. On the basis of these movements, would you expect the Swiss to be buying more or less U.S. goods? Why? Would you advise a foreign exchange speculator to buy Swiss francs at this point or to change Swiss francs into U.S. dollars? Why or why not?