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Suddenly the Euro was 1.42 francs value

beat all of a Sudden, on 10. February, on the night of Monday shortly after 23 o'clock Swiss time of Swiss franc exchange rate to be unusually strong. To 23.06

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Suddenly the Euro was 1.42 francs value

beat all of a Sudden, on 10. February, on the night of Monday shortly after 23 o'clock Swiss time of Swiss franc exchange rate to be unusually strong. To 23.06 at the Euro appreciated by 1.32 francs seconds to within to 1.42 francs. Minutes later, the nightmare was over, and the Swiss franc exchange rate was again in the same environment as of 23 PM.

The nocturnal restlessness of the Swiss franc is not an isolated case. Subject to still greater currency is the sole window in this time it is for the Australian Dollar, the new Zealand Dollar, the South African Rand and the Japanese Yen came.

A dramatic appreciation, without any discernible trigger for the Yen at the 3. January of this year, has meant that the Australian Central Bank (Reserve Bank of Australia) has adopted this phenomenon in more detail. In the outgoing week has also been addressed by the British Financial journal "Financial Times" with the subject.

risk to the financial stability

Even if the sole of currencies would return the prices back to the original values, the development of potentially dangerous consequences. Many financial derivatives that serve to hedge positions taken on the capital markets associated with currency exchange rates. Such derivatives are triggered, or change their value when currency prices reach a predetermined level.

now, unexpected extreme values of the currencies, can suffer such financial derivatives losses. Drastic changes in the value of derivatives may, in turn, act back on the capital markets, for example, when Hedge Funds need to make distress sales, to be able to increased liquidity. In the worst case, the "Financial Times" writes, can be a risk to financial stability.

On a typical day can be implemented at the international currency market, according to figures from the Bank for International settlements, more than 5000 billion dollars. Dollar, Euro and Yen are the most traded currencies, the Swiss franc follows in seventh place. Large swings are to be expected on such a liquid market.

But the foreign exchange market, unlike the stock market Central stock exchanges, but is mainly operated by large trading houses and banks. And it is traded during the work week day and night. However, depending on where the night or day prevails, there is a shift of the centre of this trade. By far the largest trading places are those in London and New York. While those are closed in the night, the trade to the far smaller trading locations in Asia, where the day begins.

When to the West the lights

go out And was always in the Transition of Asia, if the market liquidity is relatively low, as it came to be subject to the massive exclusive. The hour is between 23h and midnight (Swiss time), therefore, has on the currency markets, already nicknamed the "witch hour". But, as the investigations of the last episodes of shows, is for outbreaks of a number of factors are responsible, linked to changes in the structures on the currency markets and the could relate to the main trade.

As with equity trading Algorithms play also in the currencies of a larger and larger role. The computer programmes that trigger depending on the development on the markets automatic buy or sell orders. One of its problematic characteristics is that the so-triggered orders from the point of view of an individual Investor are understandable, they trigger in the sum but a disaster.

An example of this is the so-called stop-Loss Orders (loss-limiting orders). The automatic selling triggered orders, if a course falls below a predetermined threshold. However, even if very many such orders are triggered, drops a course through such sales.

Earlier active traders have intervened in such cases and irrational developments in the Bud. But active traders to play the currency trading less and less of a role. Since the dealer tried tire arrangement in the foreign exchange market, it is desirable to have an active role. In addition, in the thinner Asian trading the currency trading is more expensive and the banks will rely even more on the Computer.

in Addition, the banks are also less willing to take risks, which are associated with corrective strategies – if you make about support purchases, while a currency crashing. Because many computers are programmed so that they switch off altogether if the trade is showing unusual rashes, the liquidity even thinner. It is then even more likely that random triggers cause the same subject to fierce exclusive. (Editorial Tamedia)

Created: 08.03.2019, 16:15 Uhr

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