Fallout continues from the Swiss National Bank’s decision to stop pegging its currency to the euro. As the franc rapidly rose in value, many investors were caught off guard and suffered large loses.
In many cases, those trades were heavily leveraged, meaning customers might have to put down only a small percentage of the trade’s value as a deposit. If they can’t pay their losses, their brokerage firms will be left holding the bag in some cases – and a handful are now raising zn alarm about their own financial health, says Boris Schlossberg of BK Asset Management.
Outside of brokerages and some financial institutions, don’t expect the franc’s ripple effect to spread very far, says Nick Bennenbroek, head of foreign exchange strategy at Wells Fargo. However, in situations like this, uncertainty in one market can spread to others, and volatile exchange rates can be problematic for companies operating across multiple currencies, says Kevin Jacques, a professor at Baldwin Wallace University and former Treasury official.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.