Arab Today, arab today swiss central bank under fire as franc move wreaks havoc
Last Updated : GMT 04:30:15
Arab Today, arab today
Arab Today, arab today

Swiss central bank under fire as franc move wreaks havoc

Arab Today, arab today

Arab Today, arab today Swiss central bank under fire as franc move wreaks havoc

Swiss National Bank
Geneva - AFP

Switzerland's central bank came under fire at home and abroad Friday after scrapping its bid to stop the franc rising, a move that wrecked havoc on global markets and bankrupted several foreign exchange traders.
A brokerage firm in Britain and another in New Zealand declared insolvency while at home in Switzerland, exporters warned that they too could be put out of business by the Swiss National Bank's sudden decision.
"From an economic standpoint, this move is incomprehensible at the current time," the Swiss Business Federation said in a statement, warning that the country's vital export and tourism industries would be hurt.
Swiss newspaper Le Temps charged in an editorial that the central bank was "guilty of naivety" and questioned if it had forgotten the stabilising role it should play on the markets and the economy.
The SNB had "put its credibility at risk", the newspaper said, while the Tribune de Geneve said the bank was "sinking the Swiss economy".
A rout on Swiss stocks continued on Friday, with shares tumbling about 4 percent, after having already plunged 8.7 percent on Thursday.
The SNB had caught markets off guard Thursday with its shock announcement that it was abandoning the minimum rate of 1.20 francs against the euro that it had been defending for more than three years.
The Swiss currency immediately gained nearly 30 percent against the euro, before stabilising at around parity -- which is still 15 percent higher than Wednesday's rate.
- Orders cancelled -
The boss of a small watchmaking company H. Moser & Cie underlined the impact of the SNB's move in an open letter addressed to central bank chief Thomas Jordan, warning that he may have to move his business out of Switzerland.
"Over 95 percent of our watches are sold to people outside of Switzerland, and the first retailers called the same day to cancel orders," Edouard Meylan wrote.
"In fact, one thought crossed my mind: why not just move two kilometres into Germany and continue business as usual in the EU?," wrote Meylan, whose company employs 55 people.
Watchmakers are particularly jittery as the SNB's decision comes just ahead of the luxury industry's annual tradeshow, when buyers travel to Switzerland to place orders for the entire year.
Exporters are not the only ones fretting. The strength of the euro could also hurt domestic retailers as consumers flock to neighbouring countries like France and Germany to shop for cheaper goods, including daily necessities.
Switzerland's employers organisation cautioned that such "purchase-tourism" would likely skyrocket.
But for consumers like Vanessa, a 28-year-old hospital orderly, "it's like Christmas all over again!". She was outside a Geneva foreign exchange office wondering whether to convert all her Swiss franc savings into euros.
Swiss banking giant UBS estimates that the SNB's decision would deliver a severe blow to economic growth, and slashed its output forecast to just 0.5 percent this year from its previous estimate of 1.8 percent.
- Foreign brokers bankrupt -
Casualties were also piling up outside Switzerland, with broker Alpari UK declaring insolvency after clients' losses linked to the sharp rise in the Swiss franc were passed on to the company.
New Zealand foreign exchange broker Global Brokers NZ also said it was closing since "a majority of clients in a franc position were on the losing side and sustained losses amounting to far greater than their account equity."
Another forex trading firm FXCM warned it may not be able to meet certain regulatory capital requirements as clients chalked up losses totalling some $225 million -- a sum that the company could be left with.
In Poland, where 700,000 mortgages, or 40 percent of the total, are denominated in the franc, homeowners were meanwhile facing sharply higher monthly repayments.

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Arab Today, arab today swiss central bank under fire as franc move wreaks havoc Arab Today, arab today swiss central bank under fire as franc move wreaks havoc

 



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