Swiss National Bank Discontinues Minimum Exchange Rate, Moves Markets

EVENT-DRIVEN FEEDS Swiss National Bank discontinues minimum exchange rate, moves markets.

CASE STUDY: EXCHANGE RATES

On January 15th 2015, the Swiss National Bank announced that it unexpectedly scrapped its three-year policy of capping the Swiss franc against the euro. The surprise statement sent shockwaves through equities and currency markets. Bloomberg News’ first headline on the change beat our competitors by more than four minutes. RESULTS

The SNB’s decision roiled markets around the world on January 15th. The yield on German two-year notes dropped to a record minus 0.154 percent. The price of Euribor futures for some months this year rose above 100 for the first time, turning implied yields negative. The Swiss Market Index of equities slid as much as 14 percent, the biggest decline since 1988, and Swatch Group AG, Switzerland’s biggest watchmaker, tumbled. “Words fail me,” Swatch Chief Executive Officer Nick Hayek said by e-mail. “Today’s SNB action is a tsunami; for the export industry and for tourism, and finally for the entire country.” A gauge of volatility on the SMI soared as much as 138 percent. The franc surged as much as 38 percent versus the greenback and gained against all 174 foreign-exchange values tracked by Bloomberg. Volatility jumped to a more than one-year high. Elsewhere in Europe, emerging-market currencies fell at least 12 percent against the franc amid concern individuals may struggle to repay loans denominated in francs. Hungarians, Romanians and Poles borrowed francs in the run-up to the 2008 financial crisis because the interest rates were cheaper, only to get stuck with higher financing costs as price swings accelerated. The zloty weakened 14 percent to 4.1469 against the Swiss currency, paring an earlier loss of as much as 28 percent. Hungary’s forint and the Romanian leu tumbled to records.

TIMELINE

TIME SOURCE HEADLINE KEY TAGS (GMT) (Second Pass) 09:30:22.454 Scrape of La Banque nationale abolit le • SNB SNB Website cours plancher et abaisse le • GOV taux d’intérêt à -0,75% • CEN 09:30:24.786 Scrape of SNB: Nationalbank hebt • SNB SNB Website Mindestkurs auf und senkt • GOV Zins auf -0,75% -15.01.2015 • CEN 09:30:39.977 Bloomberg *Swiss National Bank • SNB News Discontinues Minimum • CEN Exchange Rate • GOV 09:31:09.808 Bloomberg *SNB Lowers Interest Rate • SNB News to –0.75% • CEN • GOV

METADATA

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