LeapRate's Daily Forex Industry Newsletter
Join now to receive first access to our EXCLUSIVE reports and updates.
Screenshot of a breaking news alert e-mail from Q2 2017
Thursday, January 15, 2014 is most certainly a date that will be consigned to the annuls of history as the day which changed the face of the global FX industry as a result of one swift move by Switzerland’s national bank.
The removal of the 1.20 floor on the EUR/CHF currency pair by the Swiss National Bank was unexpected and created a veritable tidal wave of volatility which, in some cases resulted in long-established, previously well-capitalized companies grasping for a lifeline, and others going to the wall.
As the industry begins the first trading week following the move, which now signifies the regrouping process after the event, in which global regulators, industry participants, risk managers and strategists will likely have a very full day’s work ahead, the Swiss National Bank has suggested that it may act again.
According to a report by the Wall Street Journal, Swiss National Bank President Thomas Jordan said the central bank was forced to scrap its policy of keeping minimum exchange rate of 1.20 Swiss francs per euro due to divergent economic developments and mounting risk from its euro-buying operations.
The bank will continue to monitor the situation and act if necessary, Mr. Jordan said in an interview with Swiss newspaper Neue Zuercher Zeitung.
“We have said goodbye to the minimum exchange rate,” Mr. Jordan said in the interview published Saturday. “But we will continue to consider the exchange-rate situation in our decisions and intervene in the foreign-exchange market if necessary.”
Mr. Jordan said the franc remains “greatly overvalued.” He said he expects negative interest rates introduced by the SNB to make the franc less attractive, but ruled out introducing capital controls to further weaken demand for the currency.
Indeed, Switzerland is taking drastic action in order to protect its sovereign currency against any potential difficulties that may arise should the Euro fall further and, indeed should the indebted Eurozone face further fiscal woes following the announcement last week by the European Court of Justice that the bond buying procedure is legal, thus giving rise to a potential exit by Greece, which would see debt written down, to the tremendous cost of the European Central Bank.