Market history · Currencies ·
The Swiss franc shock
On 15 January 2015 the Swiss National Bank abruptly discontinued the minimum exchange rate of CHF 1.20 per euro that it had defended since 2011, and cut its deposit rate to –0.75%. The franc jumped as much as 29% against the euro in minutes, and Swiss stocks fell sharply.
Several currency brokers and some borrowers with franc-denominated loans suffered heavy losses. The SNB explained that holding the cap would have needed ever-larger currency interventions at a time of diverging global monetary policy.
The takeaway
A currency peg is a policy choice, not a guarantee; leverage against one can be ruinous.
Sources
This is a retrospective about a past event, provided for general information. It is not investment advice, does not describe RockLake's positioning at the time, and past performance is not a guide to future performance. Read the risk warning.