The implementation of QE in the eurozone has hit the foreign exchange market hard, and the euro has plummeted against the dollar. The situation www.biquge.info this situation has made American hedge funds, which are still immersed in a big victory, complain.

At present, there are two paths in front of them, continue to operate in the European stock market and the government bond market, it is obvious that these markets will have some gains, but it is still unknown whether this part of the gains will be able to offset the losses caused by foreign exchange fluctuations; The other way is to admit it now and leave the scene.

But savvy hedge funds soon discovered that they didn't have a third option.

It all started three years ago, when the financial crisis in the United States swept the world and turned into a debt crisis in Europe, and capital across Europe was looking for safe-haven currencies, including the yen, the dollar, the renminbi and other currencies were bought in large quantities, including the Swiss franc.

When it comes to Switzerland, most people only know about its banking and watch industries. But in fact, Switzerland is one of the most stable economies in the world, and its long-term policies, secure financial system and bank secrecy have made it one of the richest countries in the world.

In addition to banking and watches, Switzerland is home to some of the world's top technology, manufacturing, pharmaceutical, chemical and food industries.

Because of the high degree of economic freedom and low tax policies, many multinational companies have set up their headquarters in Switzerland, including Nestle, ABB, Glencore, UBS, Credit Suisse and other world-renowned large companies. At the same time, the headquarters of dozens of world organizations such as the World Health Organization, the International Telecommunication Union, the World Meteorological Organization, and the World Labor Organization are also located in Switzerland.

It is a country with a highly developed and stable economy.

The Swiss franc is a natural choice for safe-haven funds, as it is strong and there is no danger of excessive depreciation or appreciation, especially against the US dollar. This has created a problem, as the influx of funds from all over Europe into the Swiss franc market has led to a rapid appreciation of the Swiss franc, which has hit the Swiss export industry hard.

But for the Swiss government, the troubles caused by the currency's appreciation have put them under pressure. First of all, it is impossible for them to limit the influx of capital by regulating the degree of freedom in the economy, which is the foundation of Switzerland. Second, it is impossible for them to ignore the pressure exerted on the government by their country's export industry, which should not be borne by the Swiss export industry.

After thinking about it, the Swiss government has implemented a measure to cap the Swiss franc to the euro at 1.2, that is, to force the exchange rate of the euro to the Swiss franc to be capped at 1.2 euros to 1 Swiss franc. They balance the inflow and outflow of money by buying euros and selling Swiss francs in the market. After all, for the Swiss franc, the Swiss government only needs to turn on the printing press, and it wants as much as it wants.

This policy lasted for three and a half years, and although it is a bit unbelievable, the Swiss government has been able to resist the pressure of currency appreciation and protect the country's export industry.

However, the implementation of the QE policy in Europe this time has led to a large amount of speculative money remaining in Europe, which has once again posed a huge test for the Swiss government.

Hedge funds soon found a third way, which was to exchange the euro, which had already been fixed, for the Swiss franc and then convert it into dollars through the market. Because the exchange rate between the euro and the Swiss franc is fixed, the value of the euro against the Swiss franc remains stable no matter how much the euro falls.

On the other hand, although the Swiss franc fluctuates slightly against the dollar, it is generally very small, because the fundamentals of the Swiss domestic economy have not changed much relative to the United States, and the eurozone is its largest trading partner.

As a result, these hedge funds poured into the Swiss foreign exchange market, and in just one week, more than 50 billion euros were poured into Switzerland, which also means that the Swiss government needs to issue more than 40 billion Swiss francs in new currency.

This inflow of money is a good thing in the short term, but if the economic situation in Europe improves and these funds flow back to Europe, it will be equivalent to the Swiss government issuing hundreds of billions of new currency to the country, which may lead to the risk of inflation.

So the market is waiting for the Swiss government's statement.

Soon, the Swiss government made a strong statement that they would do whatever it took to preserve the value of the Swiss franc. There was even a high-ranking official who said forcefully that we would sell as many Swiss francs as the market came in.

As soon as these words came out, the entire market was relieved.

The depreciation of a country's currency is the attack of the country's currency being short-selled, and its central bank can only maintain the balance of the exchange rate by shorting foreign exchange reserves and buying the national currency. This process requires the constant depletion of foreign exchange reserves, and once the foreign exchange reserves are depleted, it means that the country's currency has to depreciate.

But for a country's currency to appreciate, it's a very different story. That is, hot money constantly buys the currency of this country, and sells related foreign exchange reserve currencies such as dollars and euros to this country. To ensure the stability of the country's currency exchange rate, the country's central bank needs to sell its currency to hot money and buy the relevant foreign exchange reserves. And for this country, the national currency is nothing more than a matter of turning on the money printing machine, it can be said that there is everything, and it is no problem to want as much as you want.

Therefore, with the endorsement of the Swiss government, the whole market is full of confidence in the Swiss franc.

Hedge funds from the United States have completely put a nervous heart back into their stomachs, and they have found a way out of QE, which is to borrow the Swiss franc.

To put it simply, it's about converting euros into Swiss francs and then Swiss francs for dollars. In this way, they can erase the losses of the euro against the dollar.

Of course, some people will say that there will still be arbitrage funds in the exchange rate market, which will smooth out the exchange rate difference between the three currencies. However, arbitrage funds are only possible when capital can flow freely, and now the Swiss government is equivalent to putting a shackle on the euro and the Swiss franc, so there is no way for arbitrage funds to smooth out the exchange rate difference between the euro against the dollar and the Swiss franc against the dollar.

The exchange rate between the euro and the US dollar is largely determined by the economic situation in the euro area and the economic situation in the United States, while the exchange rate of the Swiss franc and the US dollar is determined by the economic situation in Switzerland and the economic situation in the United States, so the magnitude of the movement between the two is not the same thing at all. And for the EURUSD market, the foreign exchange market of the Swiss franc/USD is much smaller in terms of size and volume, and there is no comparison at all.

Now hedge funds can confidently and boldly hold the euro in their hands. In this way, they not only enjoy the growth of the European capital market brought about by QE, but also avoid the cost of exchange rate decline caused by the exchange rate of the euro against the dollar, which can be described as killing two birds with one stone.

This is the sentiment of many of them as God has shown them so much.

"Oh my God, is the Swiss government stupid? How could such a statement be made? ”

After seeing the Swiss government make its position clear, Jiang Shan couldn't believe his eyes, and complained to Zhong Shi again and again with a newspaper, "Do they know what they are doing?" As a result, speculative money from all over Europe will probably rush to Switzerland! ”

"As long as they have a forward contract with a broker that locks in the Swiss franc and the euro, these hedge funds will be able to do whatever they want in Europe, and they will only need to take a little bit of foreign exchange risk in the Swiss franc and the US dollar, and they will be able to make more money than they can imagine. Oh my God, this business is so comfortable! ”

The most critical step of the whole thing is not yet known, but what he knows is that there will be a big storm that will sweep the world in the future, so he is confident and bold to invest all his net worth in gold futures. But now it seems that Switzerland has done this, almost forcefully pushing back the influence of the European QE.

Of course, because of the difference in the total amount of the economy, the impact of the two news on the market is not the same. Overall, the price of gold has risen. That is to say, so far, Jiangshan has made money.

"Insatiable!"

Zhong Shi smiled helplessly, and raised his middle finger at Jiang Shan, "It's as if you're losing money now!" ”

Jiang Shan scratched his head embarrassedly after hearing this.

"By the way, wouldn't they be more attractive to Switzerland if they did this?"

After thinking about it, Jiang Shan was a little puzzled, "In this case, wouldn't Switzerland need to issue more Swiss francs, and if this money flows into Switzerland one day, won't it cause serious inflation?" ”

Indeed, as Jiang Shan thought, the whole market will be looking at the Swiss franc for safety.

"One is a market with the possibility of growth, and the other is a market where economic growth is slowing down because of currency problems, if it were you, which one would you choose?"

"Europe, of course!"

Jiang Shan replied without thinking, "So that's the case, I understand!" ”

According to the current situation in Europe, after the implementation of QE, the economy of the eurozone will improve considerably within half a year or even a year. In this case, whether it is investing in their stock market or the bond market, there is a lot to do. But for the Swiss market, I am afraid that there is no such yield.

So people with a little bit of brains will think about holding the euro, anyway, the exchange rate between the Swiss franc and the euro is fixed there, and they can't run.

"So they're still holding the euro, right?"

Jiang continued, "Maybe there will be some forward guarantees that you can convert into Swiss francs, maybe there will not be even such a contract. But they're going to keep their money in Europe, right? ”

"Yes, exactly!"

Seeing that they had entered the trap, Zhong Shi was overjoyed, but his face was expressionless, and he just said coldly, "They are still too young!" It's so naïve! (To be continued.) )