Market disarray and insolvency follows Swiss franc shock

16th January 2015


The impact of the shock move by the Swiss National Bank (SNB) to scrap the cap on the the Swiss franc’s value against the euro continued to put markets into a tailspin today.


The euro saw the largest one-day fall against the Swiss franc as the pledge to keep the franc 1.20 above the euro was abandoned yesterday. The franc gained as much as 30% against the euro on Thursday as the ceiling was removed.


Overnight Asian markets reacted badly to the news as Japan’s Nikkei dropped 2.8% and Hong Kong’s Hang Seng fell 0.5%.


Asian currency gained slightly as investors searched for safe havens; the yen gained 1.2% against the dollar. The Australian dollar rose 1%.


Currency brokers were hit particularly hard and Alpari – shirt sponsor of Premiership football team West Ham – entered into insolvency proceedings after suffering heavy losses.


In a statement published by the foreign exchange broker on its website, it said ‘the recent moved…has resulted in exceptional volatility and extreme lack of liquidity.


‘This has resulted in the majority of clients sustaining losses which has exceeded their account equity.’


Rocky Muddar, trader at TradeNext, said: ‘The 15/1/15 will be remembers for many years to come as a day that ended many a trader’s career, and saw the collapse of numerous financial institutions and smaller hedge funds.

‘Accountants, liquidators and regulators are hard at work calculating the fallout of the Titanic move and probably still will be for weeks to come.’

The SNB said its decision to remove the cap on the franc’s value against the euro was made in light of a weakening euro and the anticipated stimulus by the European Central Bank that is likely to depreciate the euro further against the dollar, meaning the franc would depreciate too.

The SNB said there was no longer ‘exceptional overvaluation’ of the Swiss franc to justify a minimum exchange rate.


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