Switzerland’s uncapped Franc hurts some global currency traders

Global Business

Switzerland’s decision to remove a cap on its currency has ruined some investors. Some currency traders have folded amid losses estimated at hundreds of millions of dollars. It’s one of the most dramatic central bank moves ever in a country renowned as a financial safe haven. CCTV America’s Owen Fairclough reported the story from Washington, D.C.

Switzerland’s decision to take the harness off the Franc is causing havoc from Washington to Warsaw. Poland has $36 billion of real estate tied up in the Swiss Franc, which is nearly 8 percent of the east European country’s economic output.

Switzerland\'s uncapped Franc hurts some global currency traders

Switzerland’s decision to remove a cap on its currency has ruined some investors. Some currency traders have folded amid losses estimated at hundreds of millions of dollars. It’s one of the most dramatic central bank moves ever in a country renowned as a financial safe haven. CCTV America’s Owen Fairclough reported the story from Washington, D.C.

The currency’s soaring value has put homeowners in deep trouble.

“The property I own is worth 250,000 [Polish] zloty ($67,084) and the loan I have to pay off for now has increased to 550,000 zloty ($147,585),” Polish homeowner Violetta Gorgoli said. “I am not able to sell the property and pay off the debt at the same time. It’s impossible, unless the government intervenes in the currency exchange.

Switzerland capped the value of its Franc and pegged it to the Euro a few years ago. The aim was to prevent currency traders looking for a safe haven from inflating the Franc’s value. However, the Swiss National Bank scrapped the cap after seeing the Euro’s value slide. That’s sent the Swiss Franc shooting up in value against the Euro and the dollar.

Banks and currency traders effectively betting on the Swiss Franc’s value continuing to drop are facing losses running into hundreds of millions of dollars.

British foreign Exchange trader Alpari, sponsor of soccer club West Ham, went bust along with a similar firm in New Zealand. New York-based firm FXCM is negotiating an emergency loan after losing $225 million. Switzerland’s famous luxury watch makers are among exporters also suffering from a higher-valued Franc.

Meanwhile, Swiss consumers are queuing up to change their money into Euros for cheap deals over the border.

The Swiss, U.S., and European Central Banks are now taking uncoordinated action, moving out of step with each other and bringing volatility into the global economy at a time when growth remains fragile.