The Swiss National Bank’s surprise decision to abandon the franc’s cap against the euro, two days after an official reaffirmed it would remain a pillar of policy, roiled currency markets. The euro slumped 1.8% against the dollar before recouping the majority of its decline within the next hour as traders reflected on the implication of the decision, which also saw the SNB deepen negative deposit rates. The franc surged as much as 38% versus the greenback. India’s rupee jumped in response to an unscheduled interest-rate cut and the Australian dollar strengthened after a report showed the nation’s jobless rate unexpectedly declined in December.
International conflict biggest threat to global stability: World Economic Forum
The risk of international conflict poses the “biggest threat” to global stability while likelihood of terrorist attacks has intensified the most since last year, the World Economic Forum (WEF) said today. Listing out risks for global stability, the Forum said water crisis is expected to be the risk with highest impact. In terms of likelihood, WEF said the second biggest risk is extreme weather events, followed by failure of national governance systems, state collapse or crisis and high structural unemployment or underemployment.
Asian shares stumbled on Friday and the dollar skidded against the safe-haven yen, after Switzerland’s unexpected move to abandon its currency cap jolted markets already roiled by plunging commodities prices. MSCI’s broadest index of Asia-Pacific shares outside Japan shed about 0.6 per cent. A resurgent yen pressured exporter shares and helped push Japan’s Nikkei stock average down 2.8 per cent.
The greenback touched a fresh one-month low of 115.85 yen, and was last slightly higher on the day at 116.24 yen. On Wall Street overnight, stocks closed lower, marking a fifth straight session of losses as investors digested the SNB’s move, disappointing bank results and the potential impact of global economic weakness on US corporate earnings.
Brent and US crude were higher in Asian trade, up 0.3 per cent and 0.5 per cent respectively, but both remained under $50 a barrel. Copper added about 0.5 per cent to $5,657 a tonne, but was still at risk of notching its worst week since 2011.
The Swiss currency surged as much as 30 per cent to a high of 0.8500 franc per euro after the Swiss National Bank (SNB) suddenly ditched its commitment to keep its franc above 1.20 per euro. The euro took back some of its biggest one-day drop against the Swiss franc in history, and was last up 1.1 per cent on the day at 1.0023 francs.
Against the dollar, the euro slightly edged up to $1.1637 after falling as low as $1.15675 on Thursday, a nadir not seen since November 2003.