Newspapers in Singapore had during the last week largely been focusing on how the rising Swiss franc could result in a steep increase in the cost of travel to Switzerland and that of luxury watches such as Rolex and other Swiss-made products.
But today’s reports highlight how a bigger problem may be looming for some forex traders here. In fact, for those across the world who have been active in forex trading!
Unpegging of Franc: For three years, since 2011, the Swiss National Bank (SNB) had tried to keep the Swiss franc down. But last week it decided enough was enough and removed the franc’s peg to the Euro.
That decision sent the franc soaring by more than 30% and the Euro, in particular, diving andcausing major upheavals among forex traders worldwide. It is believed it will have put many traders on the verge of bankruptcy.
Ripples have been felt in Singapore as well, with Saxo Capital Markets having asked currency traders in the country to pay up millions of dollars in losses suffered as a result of the unpegging of the franc.
More bankruptcies in Singapore may loom as an unfortunate offshoot.
Swiss Bank Justifies Move: The SNB has justified its decision, saying if it had held on to the peg it would have suffered a loss of no less than 100 billion francs for this month alone.
The incidents highlight the underlying risks in forex trading. All markets are controlled by manipulators, with analysts and financial institutions often contributing to the mayhem. The forex market, involving trading activity of more than $5 trillion daily, is the most risky and is simply plain gambling despite all the technicals behind it.
As someone involved in forex trading, I can say this with a certain degree of authority having noticed wild swings in any pair throughout the day. Prices change dramatically almost every 15 minutes, so there is no question of any fundamentals in forex trading.
It is just gambling and needs great caution, not blind injection of capital into it.
G Joslin Vethakumar