Forex

[DRumsfeld2000]

What is going on? 15% moves in $:CHF. I have not seen anything like this in a long time.

[thriftyandboringinohio]

Re: Forex

Reports say Swiss authorities dropped their soft peg to the Euro unexpectedly

[Chomsky]

Re: Forex

Reports say Swiss authorities dropped their soft peg to the Euro unexpectedly

Yup.

http://www.nytimes.com/2015/01/16/bu...rate.html?_r=0

[don]

Re: Forex

Could it rate as a Black Swan?

[don]

Black Swan?

and here I thought it would be an oily bird . . .

Switzerland Just Rang The Bell: The Era Of Central Bank Omnipotence Is Ending

by Bruce Krasting • January 15, 2015


I wrote about the Swiss National Bank being forced to abandon its currency peg to the Euro on 12/3/14, 12/8/14 and 1/11/15. That said, I’m blown away that this has happened today.

Thomas Jordan, the head of the SNB has repeated said that the Franc peg would last forever, and that he would be willing to intervene in “Unlimited Amounts” in support of the peg. Jordan has folded on his promise like a cheap suit in the rain. When push came to shove, Jordan failed to deliver.

The Swiss economy will rapidly fall into recession as a result of the SNB move. The Swiss stock market has been blasted, the currency is now nearly 20% higher than it was a day before. Someone will have to fall on the sword, the arrows are pointing at Jordan.

The dust has not settled on this development as of this morning. I will stick my neck out and say that the failure to hold the minimum rate will result in a one time loss for the SNB of close to $100B. That’s a huge amount of money. It comes to 20% of the Swiss GDP! If this type of loss were incurred by the US Fed it would result in a loss in excess of $2 Trillion!

In the coming days and weeks there will be more fallout from the SNB disaster. There will be reports of big losses and gains from today’s events. But that is a side show to the real story. We have just witnesses the collapse of a promise by a major central bank.

The Fed, Bank of Japan, ECB, SNB and other Central Banks have repeatedly made the same promises over the past half decade:

Don’t worry! We are here. We will do anything it takes to achieve the stability we desire. We are stronger than the markets. We can overwhelm all forces. We will never let go – just trust us!

never believed in these promises, but the vast majority of those who are active in financial markets did. The entire world has signed onto the notion that Central Banks are all powerful. We now have evidence that they are not.

Anyone who continues to believes in the All Powerful CB after today is a fool. Those who believed in Jordan’s promises now have red ink on their hands – lots of it!

The next central bank that will come into the market’s cross hairs is the ECB. Mario Draghi has made promises that he would “Do anything – in any amount”. Like I said, you would be a fool to continue to believe in that promise as of this morning.

We’ve just taken a huge leap into chaos. The linchpin of the capital markets has been the trust in the CBs. The market’s anchors have now been tossed overboard.

[Southernguy]

Re: Black Swan?

This is really an economic earthquake. Let's see what EJ has to say.
Interesting.
And gold is up fast.
Moreover: "I wrote about the Swiss National Bank being forced to abandon its currency peg to the Euro on 12/3/14, 12/8/14 and 1/11/15. That said, I’m blown away that this has happened today."
Why?
Don't quite understand the compulsion to take such a brutal decision

[LazyBoy]

Re: Black Swan?

The next central bank that will come into the market’s cross hairs is the ECB. Mario Draghi has made promises that he would “Do anything – in any amount”. Like I said, you would be a fool to continue to believe in that promise as of this morning.

We’ve just taken a huge leap into chaos. The linchpin of the capital markets has been the trust in the CBs. The market’s anchors have now been tossed overboard.

Who else is pegged to the Euro?
Who's pegged to the US dollar?

[charliebrown]

Re: Black Swan?

Is EURO/ECB getting ready for a big QE event, and the Swiss realized they could not not keep the peg?

[don]

Re: Black Swan?

does a soft peg's removal mean a hard float? in this environment apparently yes.

[thriftyandboringinohio]

Re: Black Swan?

Who else is pegged to the Euro?
Who's pegged to the US dollar?

Small countries often peg to the dollar.
A quick google gives this table

Country	Region	Ccy Name	Code	Peg Rate	Peg Ccy	Rate Since
Benin	Africa	West African CFA Franc	XOF	655.957	EUR	1999
Bermuda	North America	Bermuda Dollar	BMD	1	USD	1972
Brunei	Asia	Brunei Dollar	BND	1	SGD	1967
Burkina Faso	Africa	West African CFA Franc	XOF	655.957	EUR	1999
Cameroon	Africa	Central African CFA Franc	XAF	655.957	EUR	1999
Central African Republic	Africa	Central African CFA Franc	XAF	655.957	EUR	1999
Chad	Africa	Central African CFA Franc	XAF	655.957	EUR	1999
Dijibouti	Africa	Franc	DJF	177.721	USD	1973
Equatorial Guinea	Africa	Central African CFA Franc	XAF	655.957	EUR	1999
Eritrea	Africa	Nakfa	ERN	15	USD	2005
Gabon	Africa	Central African CFA Franc	XAF	655.957	EUR	1999
Guinea-Bissau	Africa	West African CFA Franc	XOF	655.957	EUR	1999
Ivory Coast	Africa	West African CFA Franc	XOF	655.957	EUR	1999
Lesotho	Africa	Loti	LSL	1	ZAR	1980
Mali	Africa	West African CFA Franc	XOF	655.957	EUR	1999
Namibia	Africa	Dollar	NAD	1	ZAR	1993
Niger	Africa	West African CFA Franc	XOF	655.957	EUR	1999
Republic of the Congo	Africa	Central African CFA Franc	XAF	655.957	EUR	1999
Senegal	Africa	West African CFA Franc	XOF	655.957	EUR	1999
Swaziland	Africa	Lilangeni	SZL	1	ZAR	1974
Togo	Africa	West African CFA Franc	XOF	655.957	EUR	1999
Hong Kong	Asia	Dollar	HKD	7.75-7.85	USD	1998
Nepal	Asia	Rupee	NPR	1.6	INR	1993
Cuba	Central America	Convertible Peso	CUC	1	USD	2011
Panama	Central America	Balboa	PAB	1	USD	1904
Bosnia and Herzegovina	Europe	Convertible Mark	BAM	1.95583	EUR	2002
Bulgaria	Europe	Lev	BGN	1.95583	EUR	2002
Denmark	Europe	Krone	DKK	7.46038	EUR	1999
Latvia	Europe	Lats	LVL	0.702804	EUR	2004
Lithuania	Europe	Litas	LTL	3.4528	EUR	2005
Bahrain	Middle East	Dollar	BHD	0.376	USD	2001
Jordan	Middle East	Dinar	JOD	0.709	USD	1995
Lebanon	Middle East	Pound	LBP	1507.5	USD	1997
Oman	Middle East	Rial	OMR	0.3845	USD	1986
Qatar	Middle East	Riyal	QAR	3.64	USD	2001
Saudi Arabia	Middle East	Riyal	SAR	3.75	USD	2003
United Arab Emirates	Middle East	Dirham	AED	3.6725	USD	1997
Venezuela	South America	Bolivar	VEB	6.3	USD	2013

[Chomsky]

Re: Black Swan?

Is EURO/ECB getting ready for a big QE event, and the Swiss realized they could not not keep the peg?

That's what I've read. In their communication to the press, the SNB noted they had to make this move because of "policy divergence" -- some kind of shot at the Fed.

[don]

Re: Black Swan?

That's what I've read. In their communication to the press, the SNB noted they had to make this move because of "policy divergence" -- some kind of shot at the Fed.

Que a false flag?

[Chomsky]

Re: Black Swan?

Que a false flag?

Wha?

The SNB couldn't afford the euro peg any longer, because of the euro's fall. They decided a short, very sharp adjustment was better in the long run, or so they said in their press conference.

We'll see if the Fed raises rates now.

[don]

Re: Black Swan?

Jesse's Cafe Americain weighs in . . .


There will be a reckoning.

There is a fantasy that the US is a financial fortress, like the JP Morgan Balance Sheet, that does not condescend to notice developments overseas. Hah! The notion that large sovereigns with their own currencies are islands unto themselves, which some moderns are casting about as something new, is nonsense and rubbish.

Bloomberg financial TV become 'The View' for the one percent, and the level of discussion by the spokesmodels was not particularly useful anymore, especially since Adam Johnson left. CNBC is not much better, with its cronyism. So I think most of their viewers will be caught by surprise in whatever should come as they were in 2008, 2002, etc. Forewarned is forearmed.

We live in a very interconnected world, with the financial sector providing a web of counterparty dependency. While there are certainly some who would like to see the US Dollar become the one world currency, that is highly unlikely to happen. And so the world remains interdependent. What the Fed and the Treasury do with the Dollar matters, and confidence is paramount.

The Swiss National Bank did not release this peg lightly. A 'stronger franc' is not good for Swiss business which is more export than import oriented. And while it might provide a little edge for the Swiss Banks, they are so internationalized that it makes little difference.

I suspect that this will be downplayed by the talking heads. The Bankers want to maintain the mystique of supra-natural competency and wisdom, and the funds who are getting blowtorched on the short side of this flight to safety want to get out with their skins intact.

Big things are happening. Gold has broken out, but silver has not followed yet, and certainly not seen its high beta breakout engines kick in, which is about as clear a sign of a flight to safety as I can imagine.

Give this one some time and don't chase it. Things will continue to move slowly in fits and starts. I do not think that this is the big one yet, but there is not a lot of doubt in my mind that the global financial system is heading for a reckoning with valuation. The actions of the economists and the Bankers, with their servile political servants, have been so counterproductive and arrogant that the next financial collapse has been almost assured.

Certainly no need to panic. But now is a good time to make sure that you have taken some measures to get yourself out of the blast zone of financial folly.

[LazyBoy]

Re: Black Swan?

I read in another forum that there are non-Swiss people (Poland, Romania and Hungary were mentioned) with mortgages in Swiss francs. Estimates of 500k-700k people in Poland. The interest rates were significantly less, but now they're boned.