It was one of the sharpest one day moves in the history of the foreign exchange markets. One harks back to 1992, when George Soros famously broke the Bank of England, sending the pound plummeting. Even that affair was spread over several weeks. You really have to go back to the Nixon shock in 1971, when a president beleaguered by a losing war in Vietnam moved to take the US off the gold standard, to find moves of similar magnitude.
To discourage investment in the franc, the SNB cut its base lending rates to almost zero in August and increased liquidity three times, but with apparently little impact.
One typical tool for a central bank in such circumstances is to go on cutting rates. But now the central bank had few options other than to peg the currency. Why the compulsion? Because the Germans have some industries and products similar to Swiss and were stealing the Swiss sheep !
Those with much more leveraged futures positions have been completely wiped out, sticking prime brokers and custodians with the left over bill.
The estimated cost of the peg goes up to $500 billion. That’s a lot of Swiss cheese for a nation of only 7 million bankers, hoteliers, dairy farmers, and private ski instructors !
Separately on the demand of US to Swiss Banks to make disclosures to their tax authorities, they want all data concerning private customers and US foundations which have deposited at least $50,000 (€35,300) in Switzerland between the period of 2002 and July 2010. The Swiss Financial Market Supervisory Authority surveyed a number of Swiss banks and determined that between $20 billion to $30 billion (€14.2-21.3 billion) was held by "tens of thousands" of US customers, another media outlet, the TagesAnzeiger, reported on Tuesday. Switzerland has not handed the names of any clients of Swiss banks to US tax authorities per Swiss President Micheline Calmy-Rey.
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