The sharp rise of the Swiss franc after the abolition of its peg to the euro has already become a cause of adverse events, not only in the foreign exchange market. Brokerage companies go bankrupt around the world. In the disadvantaged were Swiss exporters and ski resorts, as well as residents of a small German exclave.
The sharp rise of the franc was the biggest shock of the currency market in the outgoing week. On Thursday, the Swiss National Bank (SNB) all of a sudden decided to lift the ceiling on the franc. It was introduced in 2011 during a severe crisis in the eurozone and a sharp reduction in price of the euro, the controller then explained that protects the interests of exporters. After the deregulation of the franc rose against the euro and the dollar by almost 30%. Despite the continued slowdown and even some rebound, the currency market did not escape the turmoil.
In the medium term this unexpected move could undermine confidence in the Swiss regulator, currency strategist at UniCredit fears Vasileios Glionakis .
Back in December, the Swiss Central Bank Chairman Thomas Jordan said about Protection rate of 1.2 francs per euro as an “absolute necessity”, so the failure means that the SNB is ready to sacrifice the interests of exporters.
«Apparently, came the limit when maintaining the current exchange rate of the minimum cost SNB would be too expensive. Therefore, the regulator decided that since investors want to invest in the franc even at a loss for themselves (after all, the key rate is negative), let them do it.
Yes, of course, have to sacrifice a number of exporters, but the stability of the financial system is above all “- told” Gazeta.ru “analyst” discovery “Andrei Kochetkov.
Brokers do not have time for the course
Exporters – are not the only victims.
The sharp jump in the franc has caused serious problems for online brokers, some of which even on Friday declared bankruptcy.
Among them, the British Alpari UK. “The refusal of the Swiss National Bank’s policy of limiting the franc to the euro led to an exceptional volatility and extreme liquidity shortage. This led to the fact that many of our clients have suffered losses in excess of funds on their accounts. In cases where the client can not cover the losses on their own, this responsibility passes to us, “- said in a message Company declared a technical default. In accordance with the rules of the British Department for financing activities (FCA), means retail clients are separated from the assets of the company, the report says.
Earlier in the same way New Zealand went bankrupt broker Global Brokers NZ, who declared that he could not comply with the minimum capital of 1 million New Zealand dollars ($ 782,500). Company Excel Markets – also from New Zealand – reported that after the decision of the Central Bank of Switzerland lost its working capital and unable to resume operations.
New York FXCM, in turn, said that “can break some regulatory capital requirements, “after customers caused her loss of millions of dollars. By the evening of January 16 the New York Stock Exchange suspended trading in shares of FXCM, after they have fallen by almost 90%.
Also, some of the risks and the need to resort reserves reported by the British online broker IG Group and Swiss Swissquote , the suspension of trade Franks said representatives of the bank and HSBC – one of the largest dealers in the foreign exchange market. Regulators Singapore, Japan and Hong Kong have sent inquiries about the incident in a variety of brokerage firms, since a large number of messages from private traders on losses may indicate a threat to the financial stability of the country.
New York division of US bank Citigroup has lost more than $ 150 million, reports Bloomberg, citing a source. Also suffered the loss of Deutsche Bank and the British Barclays.
Traders failed to put traditional for such jumps automatic orders to close positions (to prevent complete loss of capital) – probably due to the fact that the jump rate occurred almost instantaneously, told The Wall Street Journal Mirza Baig, head of analysis of foreign exchange markets at BNP Paribas in Hong Kong.
The pressure on Swiss companies
So far, the company, based in Switzerland, loud statements do, however, experts recall what happened to them four years ago, when the franc also grew, though not so fast.
Columnist The New York Times Neil Irwin advise readers to compare Switzerland with Virginia, comparable with the European country in terms of population. According to him, companies and individuals who wish to place funds in francs, have created unprecedented pressure on the Swiss currency, which since the beginning of 2010 until the middle of 2011 rose against the euro by 44%. “Imagine that the dollar, as well as all goods and services in Virginia are 44% more expensive than in neighboring states. Who will go there to rest or to buy something? “- Draws attention Irwin.
It is from this suffering – and are likely to suffer in the near future – Swiss watch manufacturers, cheese , chocolate, pharmaceutical companies and ski resorts, as about 46% of Swiss exports falls on euro zone, and the cheaper euro makes exports less profitable than imports.
Already shares fell famous brand of Swiss watches Swatch and the Swiss SMI stock index in two days lost about 12 percentage points.
The international rating agency, Fitch believes that the rise of the franc will reduce the profitability of the largest Swiss banks, but much weaker effect on their compliance with capital adequacy reports Financial Times. According to Fitch, many of the major Swiss banks profit from foreign exchange transactions or operations in foreign jurisdictions, and operating expenses are in francs. It is those credit institutions whose costs are denominated in francs, and will suffer the most.
The Germans move to Switzerland
The problems affected not only the big players, but also some individuals, and we are not talking about bankers or traders. Büsingen am Hochrhein – the only German exclave in Switzerland, a small community in the district of Konstanz.
Defrosting the franc against the euro can make life in this village prohibitively expensive, so the mayor Marcus Mёll afraid wave of emigration.
Büsingen has long been associated with both countries.
He has two postal codes – German and Swiss. “Büsingen” – the only German football club, playing in the Swiss league, a division of the Canton of Zurich. Pupils byuzingenskoy elementary school after the fourth grade to decide whether they want to attend in the future in Switzerland or Germany.
Political old features are determined by the intergovernmental treaty of 1962. Among other things, it means that politically Büsingen belongs to Germany, and economically – to Switzerland. As a result, residents pay for purchases in francs, and the taxes paid in euros. This is becoming more of a problem, since the cost of living in Switzerland, and German taxes are extremely high. “Because of this, we are left with a much smaller proportion of earnings than our Swiss neighbors” – complains Mёll.
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