Swiss Bank on the Franc
Early Thursday morning, the Swiss National Bank shocked currency traders by letting the Swiss franc move on its own, which allowed the largest one-day move in the currency's modern history, rising from $0.98 to $1.22 in under a half hour. This massive move caused turmoil among currency investors, bringing riches to those who banked on the franc and bankrupting those that bet against the Swiss.
Switzerland has long been a haven for wealthy investors who seek its banking secrecy, but in the past six years of global economic turmoil, its relatively strong and stable economy has attracted investors who have been flocking to its currency.
Switzerland is notoriously independent, avoiding the European Union and the euro, even as all its major neighbors joined. Nonetheless, the Swiss economy is heavily reliant on exports to EU nations. As the franc rose in recent years, Swiss products became too expensive for would-be European buyers.
As a result, the Swiss National Bank had been holding down the value of the franc by selling its franc-denominated reserves and buying euro currency instead. As the euro continued in its freefall (to a ten-year low against the US dollar this week), it became increasingly expensive for the Swiss to maintain this policy, which led to Thursday's shock.
Soybeans get Crushed
On Monday, the USDA updated its tally of this year's soybean harvest and showed even larger supplies than had been anticipated, increasing this year's crop estimate again to a record-breaking 3.969 billion bushels. In the aftermath of the report, soybean prices plummeted by 60 cents per bushel, trading below $9.90 by the end of the week.
The same report projected a robust wheat stockpile and tighter corn supplies, but both markets were pulled lower in a general grain sell-off, trading midday Friday for $5.36 and $3.85, respectively.
Crude oil prices fell to a fresh five-year low this week, trading Tuesday as low as $44.20 per barrel. Then on Wednesday, just as drillers and oil investors were in their deepest despair, prices exploded more than 5% higher, the biggest rally in over two years.
Going forward, the rebound has given some oil bulls hope that the market's long decline may finally be over, but other analysts warn that the global supply is still overwhelming and growing, which could cause prices to drop to new lows in the near future. Lower crude prices could further discount gasoline to the delight of American drivers.
Posting a comment requires free registration:
- If you already have an account, follow this link to login
- Otherwise, follow this link to register