It has been eight long years since the USDCHF crash of 15th January 2015, an event which shook the entire financial world. This incident is still etched in the minds of Forex traders, especially those who were long on USD/CHF or EUR/CHF at that time. On this particular day, the Swiss National Bank (SNB) decided to deviate from its promise to defend the strengthening of Switzerland’s currency against the Euro. As a result, the Swiss franc (CHF) appreciated 30% against the U.S. dollar (USD), leading to severe economic disturbances.
The immediate consequences of the currency swing were focused on small brokers who closed their shops within 24 hours of the announcement. The losses were too significant for them to bear, and they were forced to close their doors. The unusual situation did enlighten traders with a valuable lesson about the currency market. It shed light on the fact that markets may seem stable, but there is no guarantee that they will not change their direction. The momentous event also taught Forex traders the significance of using stop losses to their advantage, and using leverage wisely.
The long-term effects of the crash were also not insignificant. For example, the SNB’s move undermined the trust of Forex traders in central banks and their policies, and many traders began to question the reliability of such policies. In addition to this, the move also highlighted the risks associated with trading on leverage and showed that traders need to be careful when using leverage to avoid significant losses.
Another lesson the 2015 USD/CHF crash taught traders was the importance of diversifying their portfolios to reduce their risk exposure. By spreading their investments across different currency pairs, traders can mitigate the impact of a single currency’s decline. Meanwhile, it is also essential to keep up with the latest news and economic events that can affect the market’s direction. Moreover, a Forex trader knows how crucial it is for them to stay informed about significant announcements from central banks, geopolitical events, and other factors that can influence the currency markets.
Today, eight years later, Forex traders take the event as a cautionary tale, reminding them that the market can be unpredictable and that they need to be prepared for unexpected events. Although there is no way to exactly predict the market’s every move, traders can benefit from tools like leverage and stop loss to protect themselves from such unimaginable trading situations.
Talking about the present, the Swiss franc weakened to around 0.94 per USD at the beginning of March 2023, hovering around its lowest since late November 2022, as expectations of a hawkish Federal Reserve supported a sharp rebound for the dollar. The franc was also pressured by the stall in the Swiss GDP in the fourth quarter of 2022, which countered the expectations of a slight 0.1% growth rate and limited the room for the increases in interest rates by the Swiss National Bank. Consumer prices rose by 3.3% in February 2023, halting the economy’s momentum of slowing inflation and jumping above analysts’ forecasts of 2.9%. The data highlighted SNB Chairman Jordan’s concerns about inflation still presenting upside risks due to second-round effects and ramped-up bets of more rate hikes by the central body.
{1 USD = 0.932298 CHF Mar 10, 2023 00:25 UTC}
