Euro Contagion From Swiss Shock Roils Japanese Retail Traders
(Bloomberg) — Japanese individual investors’ appetite for currency trading will probably drop after the Swiss National Bank’s unexpected decision to abandon the franc’s cap against the euro roiled markets, according to Gaitame.com Research Institute Ltd.
The SNB yesterday ended its three-year-old cap of 1.20 franc per euro, prompting a surge in the Swiss currency and also the yen. The Japanese and Swiss currencies are often regarded as havens because the countries run current-account surpluses. The franc fell about 4 percent today after surging as much as 38 percent versus the dollar and 41 percent against the euro yesterday. Japan’s currency headed for its third weekly gain versus the euro.
“It’s inevitable that investment appetite will shrink,” said Takuya Kanda, a senior researcher at Gaitame.com Research Institute, a unit of a Tokyo-based company that offers investors the chance to borrow money to fund trades. “There were quite a few people who got hit by the slides in euro-dollar, euro-yen as the euro plunged immediately after SNB’s decision.”
The decision by Swiss policy makers to manage a currency popular with investors at times of crisis sent JPMorgan Chase & Co.’s index of global currency volatility to the highest since June 2013. FXCM Inc., the largest U.S. retail foreign-exchange brokerage, said client debts threatened its compliance with capital rules, while Global Brokers NZ Ltd., a New Zealand-based dealer, said the impact on its business is forcing it to shut down.
Huge Demand
In Japan, over-the-counter trading of currency pairs totaled 576 trillion yen ($4.9 billion) in November, with euro- franc trades accounting for 380 billion yen and franc-yen pair making up 343 billion yen, according to data compiled by the Financial Futures Association of Japan. By contrast, dollar-yen made up the most with 463 trillion yen, followed by euro-yen of 28 trillion yen and pound-yen of 26 trillion yen, the data shows.
“I’ve never seen such huge demand for the Swiss franc in my more than 25 years of career in the foreign exchange market,” said Masakazu Satou, a currency adviser at Gaitame Online Co., a retail foreign-exchange brokerage in Tokyo. “Experienced traders have probably been hit by the move.”
To contact the reporters on this story: Hiroko Komiya in Tokyo at hkomiya1@bloomberg.net; Tomoko Yamazaki in Singapore at tyamazaki@bloomberg.net To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Tomoko Yamazaki
