by James Corbett, The International Forecaster:
It had to happen sooner or later, but almost no one was expecting it to come this week. In a move that has alternately been described as a “bombshell,” a “shocker,” a “tsunami,” a “once-in-a-blue moon event,” “all hell breaking loose” and “the biggest FX move in 30 years,” the Swiss National Bank stunned world markets this week by giving up on its four year long attempt to keep the franc/euro exchange rate above 1.20. At the same time it made an unscheduled rate cut, slashing interest rates down to 0.75%.
The impact of the move was immediate, with the decision exploding like a bombshell across currency markets. The euro lost 41% against the franc on Thursday, the largest one day move on record. Overall the franc rose 15% against all 150 currencies tracked by Bloomberg. FXCM Inc., the largest retail foreign exchange broker in the U.S. with over $1.4 trillion in trades last quarter, has said its clients are down a combined $225 million on their accounts after the move, meaning the company “can no longer meet regulatory minimum capitalization requirements.” Other large FX traders are reporting losses in the tens of millions and two New Zealand-based currency brokers, Global Brokers NZ and Excel Markets, as well as UK-based Calpari have already gone belly-up, with reports of massive losses flooding in from other firms around the world.
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