From Financial Times:
The Swiss National Bank moved to weaken the Swiss franc on Thursday, the first time a big central bank has intervened in the foreign exchange markets since Japan sought to weaken the yen in 2004.
The bank’s move, which sparked fears that other countries could follow suit, comes as the value of the Swiss franc has soared as investors seek a haven from the recent market turmoil...Analysts said the move was likely to increase talk that countries were set to engage in a bout of competitive devaluation.
“Let the currency wars begin,” said Chris Turner at ING Financial Markets.
Countries around the world faced with the constraint of zero interest rate levels might feel it was acceptable to intervene to weaken their currencies in order to ease monetary conditions, he said, adding that other export-dependent economies such as Japan would “probably be at the head of the queue”.
I remember well the times when the Bank of Japan kept buying the Dollar to weaken the Yen. Often, once the BOJ stopped buying, we traders would make easy money by selling the USDJPY currency pair as soon as they finished. It was a waste of money for the Japanese taxpayers, and it merely put money into the pockets of traders like me.
Worse, however, in this day, is that it threatens to set off currency battles between countries that could deepen the recession. Protectionism deepened and worsened the Great Depression, and it has the potential to do the same during these difficult economic times.
Worse, however, in this day, is that it threatens to set off currency battles between countries that could deepen the recession. Protectionism deepened and worsened the Great Depression, and it has the potential to do the same during these difficult economic times.
