Swiss franc scraps euro peg

Masomnia

Bulgaria's currency is pegged to the Euro in some way or other I seem to remember (it's normal to talk about such things on dates, right?).

Surely if the UK were going to have a negative base rate it would have happened already?

Generali

Masomnia wrote: »

Bulgaria's currency is pegged to the Euro in some way or other I seem to remember (it's normal to talk about such things on dates, right?).

Surely if the UK were going to have a negative base rate it would have happened already?

There are probably a few others in the Eastern and Central European group of Euro 'hopefuls'.

The Swiss push rates down from -.25% to -.75% when the announcement to abandon the peg was made. I'm not convinced they achieve much except in very limited circumstances, e.g. you have massive capital inflows.

purch

Generali wrote: »

The US has always been of the opinion (as in the famous quote), "It may be our currency but it's your problem",

The Fed has historically not based policy around the value of the USD, and most of it's interventions have been due to other CB's worries about FX values.

I think times are slightly different now, and the Fed/US Treas will not want to see a particularly overvalued USD. There is a long way to go before we get anywhere near that, but it will be on their minds more than previously.

purch

Generali wrote: »

I don't pretend to understand this all properly myself (yet) but from my limited understanding the SNB has put a negative interest rate onto 'sight deposits' at the Central Bank. That in turn (I think) limits the quantity of deposits banks can take as they have to hold reserves against those deposits at a negative interest rate.

Sight deposits are basically non term deposits, immediately available. The SNB has historically used negative interest rates over month ends, and particularly year ends to control (try to) the amounts of sights deposits held.

If the value of the currency is rising, then a -0.75% overnight rate will be a minimal deterrent to holding CHF

The way the Bank runs things is slightly different to the SNB, but anyone expecting a negative Base rate to reduce borrowing costs is likely to be disappointed, as will savers expecting any return at all.

Generali

purch wrote: »

The Fed has historically not based policy around the value of the USD, and most of it's interventions have been due to CB's worries about FX values.

I think times are slightly different now, US Treas will not want to see a particularly overvalued USD. There is a long way to go before we get anywhere near that, but it will be on their minds more than previously.

My thought is that as the US isn't really a trading nation at the best of times and have self sufficiency in oil (pretty much at least) they will care less than usual about FX rates


USians want to consume and don't give a !!!! about trade deficits or surpluses IME (limited I admit). A strong exchange rate helps importers (obvs) and so raises the standard of living for those that keep their jobs (non-exporters).

Pincher

I wish they would do a movie based on China dumping US Treasury bills. Roland Emmerich of Independence Day, The Day After Tomorrow, 2012 and White House Down, go for it.


Set Rome on fire just to watch it burn.


As it's done by CGI, no actual US citizen will be harmed in the making of this movie.

Generali

Pincher wrote: »

I wish they would do a movie based on China dumping US Treasury bills. Roland Emmerich of Independence Day, The Day After Tomorrow, 2012 and White House Down, go for it.


Set Rome on fire just to watch it burn.


As it's done by CGI, no actual US citizen will be harmed in the making of this movie.

Kinda an action movie by balance sheet.

"You come here talkin' about respect and then tell me you ain't buyin' no T-Bills! I'm bonna give ya a Fed Funds rate yer can't refuse".

michaels

What is the easiest way to buy Krone?

antrobus

Generali wrote: »

The losses are in the hundreds of millions, that is not an existentialist problem to a large bank.

The only people going bust will be some hedgies and a few bucket shops that deserve to be regulated out of existence anyway.

Writing in Private Eye, Slicker notes that Alpari has gone pop. No idea of whether or not they qualify as a 'bucket shop' or not[FONT=Myriad Roman, Arial, Helvetica, Sans-serif;]. [/FONT]But he also mentions big hits being taken by Saxo, Deutsche, and Citibank.

purch wrote: »

....The huge rise of private individuals "trading" in Forex, and thinking they have stumbled upon a foolproof no lose formula has been worrying. Hopefully this will have woken them up to understand that it's a bit more complicated than they thought.

Slicker refers to a "Citi Report" that there were 4 million individuals trading online comprising 20% of the spot market. Presumably therefore there are potentially a lot of people out there who took a big hit.

antrobus

Generali wrote: »

I can't think of any other currencies that are formally pegged to the Euro except the CAR Franc. There are probably a few other little ones like Cape Verde or something.

....

Well since you ask ....:)

It's the CFP franc, both CFA francs, the Comorian franc and the Cape Verde escudo

Other countries who unilaterally shadow the Euro in some way are the Yugoslav Republic of Macedonia, Serbia,Tunisia, Czech Republic, Croatia, Romania, Hungary, Bulgaria, and Bosnia and Herzegovina

Other countries that link their currency to the value of ‘currency baskets’ that include the Euro are Botswana, Jordan, Libya, Morocco, Russia, Seychelles, and Vanuatu

http://ec.europa.eu/economy_finance/euro/world/other_currencies/index_en.htm

Generali wrote: »

Ah yes, just remembered that the Danish Krone is also attached to the Euro. ...

Denmark is in ERMII. In fact, as far as I can see the only currency in ERMII is the krone.

http://ec.europa.eu/economy_finance/euro/adoption/erm2/index_en.htm

No mention of Sweden.