Swiss Franc Forex Conspiracy

The most dangerous Forex conspiracies are those hatched by central banks. The Swiss franc Forex conspiracy bankrupted many Forex traders and brokers. However, not all broker suffered when the Swiss National Bank eliminated its cap on the Euro and the value of the franc instantaneously rose by nearly forty percent! Many are demanding payment from traders whose accounts were wiped out. And traders who were awake and trading when the news broke typically went long on the franc and short on the Euro and made money. But, if someone knew in advance of the Swiss National Bank decision they could have made a lot of money!

Every Trade Has a Winner and a Loser

The news is full of how traders and brokers lost money. There is little news about who made money in these trades. Certainly more than one person with the Swiss National Bank knew in advance. Did any of them enter currency trades that later became immensely profitable?

Fallout from a Stronger Franc

Many Swiss banks report their assets in francs but hold currency reserves in Euros, Dollars, Yen and British Pounds as well. Credit Suisse commented that it will not have lost much money from the change in value of the franc but that its profits may suffer this year.

Many Swiss companies will be hurt by this decision as their products have immediately become thirty percent more expensive outside of Switzerland. An alternative is for these companies to cut prices and absorb their losses.

The amount of damage spread out in this case suggests a Swiss franc Forex conspiracy which may or may not come to light.

Why Would the Swiss National Bank Do This?

The answer is that it was getting too expensive to prop up the Euro and keep pushing down the value of the franc. And it was going to get more difficult when the European Union starts printing money for a Quantitative Easing Stimulus program much like the US Federal Reserve used to rescue the US economy. In this sense it was not a Swiss franc Forex conspiracy so much as necessary shift in Swiss monetary policy. However, the damage done to Forex accounts across the world is the same. Forex conspiracy rates change minute by minute but rarely so dramatically in a major currency. The damage is done and perhaps traders will learn their lesson to stay at the terminal when trading Forex or to only buy Forex options in which loss is always limited and profit is always possible.

Who Is Next?

An interesting follow up to this story is the suspicion that the Chinese Yuan may follow the Swiss franc in ceasing to support foreign currencies and suppress itself.  China has a bigger economy and dreams of internationalizing the yuan. If the Swiss bank move was a Swiss franc Forex conspiracy remains to be seen. However, considering the non-transparency of Chinese markets and actions a Chinese yuan Forex conspiracy in which insiders profit is certainly likely.