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How The Swiss National Bank Manipulates The Market

By Richard Sims

January 2015 ushered in unprecedented volatility in currency markets after the Swiss National Bank (SNB) removed its peg on the EUR/CHF pair (euro to Swiss franc).

Since 2011, the SNB has been dousing foreign currency markets with francs in order to minimize the overvaluation of the franc to the euro - a process that sprung from the government-debt crisis in Europe. On January 15, 2015 that peg was removed, and the resulting price action made fortunes for some investors; and crippled others.

The Original SNB Predicament

Circa 2008. (click to enlarge)

Most recall that the Eurozone Crisis was characterized by unsustainable sovereign debt across Europe coupled with slowing economies worldwide. Euro members like Greece, Spain and Portugal were no longer able to repay their debts, thus approaching insolvency and creating crisis situations for the eurozone as a whole.

The debts of these countries were downgraded to "junk"… Read More …