Swiss Stock Markets- 'I'ts biggest one day fall in over 25 years'

-Swiss tendency to keep money out results in an epic foreign exchange market spike-

Switzerland wants to keep money out of its country! That just shows

how bad the rest of the world's economies

are... The most iconic banking nation in

the world is issuing penalties in an

attempt to keep outside money from

coming in. The Swiss National Bank's

(SNB) President, Thomas Jordan,

confirmed the decrease of the Swiss

interest rate to -0.75%. No other central bankin the world has ever set an interestrate

that low.

The abandonment of the Swiss Franc-Euro cap resulted in a 30% jump against the

Euro. Movements of around 2% are usually considered big in the foreign exchange

market. The move wiped 9% off the value of the Swiss stock market, its biggest one

day fall in over 25 years. Moves in the Swiss Franc saw shares in the Swatch Group

dropping by 15%, while Richemont, whom owns luxury brands such as Cartier,

Montblanc and Chloé, dropped 14%.

The Euro declined to 0.80 Francs per euro, before recovering slightly to 1.03 Francs

per euro. The Franc also gained 25% against the US Dollar, trading at 0.89 Francs

for one US Dollar. The spike in the Swiss Franc's foreign exchange forced an

investment firm to admit that the sudden shift in the Swiss Franc had cost them as

much as £30m

So what exactly happened?

The Euro-Zone is a group of countries that share the Euro as a currency. The Swiss

Franc does not form a part of the Euro-Zone, and with its low interest rates it became

known as a safe haven to stash all your assets. The Euro- Zone has given people plenty to be

concerned about. The wake of the Greek debt crisis at the beginning of the decade,

lead investors to jump into the Swiss Franc. The problem with that, is that it makes the goods produced by Swiss

companies more expensive to export. That was enough reason for the Swiss National Bank to cap the value of a Franc at 1.20 Francs per Euro. The Swiss National Bank also decided to charge negative interest rates, leaving investors with a

fee to park their money, in an attempt to keep investors from banking with the Swiss The Swiss National Bank

National Bank. This would also

be another way of fighting currency overvaluation.

Why did this happen?

The surprise move came as Mario Draghi, president of the European Central Bank (ECB) considered new measures to stimulate the Euro-Zone's economies. Many investors believed that the ECB would start buying long-term debt from the US Federal Reserve in an attempt to push down long-term interest rates. This strategy is known as Quantitave Easing (QE). QE in Europe is expected to bring down the value of the Euro compared to the US Dollar. The Swiss didn't want its Franc's value to be dependant of the policy makers at the ECB. The Euro has lost its value considerably against the US Dollar, which has caused the Swiss Franc to weaken against the US Dollar. Under these circumstances the Swiss National Bank concluded that enforcing and maintaining the Franc-Euro caps are no longer justified.

Any Comments ?

Well like Bill Hubard commented on Fox-Business : "Sell the Euro, Sell the Euro, Sell the Euro!!!