Currency speculators and global macro hedge funds with large short positions in the Swiss franc are staring massive losses in the face after the Swiss National Bank shocked markets on Thursday by removing a three-year-old cap on the currency.
Reuters reports that the move sent the safe-haven franc soaring against the euro and the U.S. dollar at a time when more than $3.5bn was betting on more franc weakness, the largest such position in more than a year and a half.
The damage from the Swiss franc's sharp moves comes as a blow for macro hedge fund managers nursing wounds from nearly four years of mediocre performance. Only days ago, the SNB termed the 1.20 francs per euro cap the cornerstone of its monetary policy.
Alpari UK announced earlier this morning:
'The recent move on the Swiss franc caused by the Swiss National Bank’s unexpected policy reversal of capping the Swiss franc against the euro has resulted in exceptional volatility and extreme lack of liquidity. This has resulted in the majority of clients sustaining losses which has exceeded their account equity.
Where a client cannot cover this loss, it is passed on to us. This has forced Alpari (UK) Limited to confirm today, 16/01/15, that it has entered into insolvency. Retail client funds continue to be segregated in accordance with FCA rules'.