Currency Peg Abandonment

Dated events

1. Sept. 16, 1992 · Black Wednesday: UK forced out of European Exchange Rate Mechanism
   The British government gave up trying to keep the pound's value tied to the German mark after spending billions and raising interest rates twice in one day failed to stop speculators from betting against it. It mattered because it showed that even a major government could be overwhelmed when it promised to keep its currency at a certain level but the market didn't believe it could. Britain's economy actually improved in the months that followed, and the country never rejoined the fixed-rate system.
2. July 2, 1997 · Thailand abandons baht peg, triggering Asian financial crisis
   Thailand's central bank announced it would stop fixing the baht's value to the US dollar because it had run out of the dollar reserves needed to defend the peg. This terrified investors across Asia because many neighboring countries had similar fixed-rate promises and heavy foreign debts, raising fears they could collapse too. Over the following months, currencies in Malaysia, Indonesia, South Korea, and the Philippines all fell sharply, spreading the crisis across the region.
3. Aug. 17, 1998 · Russia devalues ruble and defaults on its domestic debt
   Russia announced a sharp cut in the ruble's fixed value against the dollar and at the same time stopped paying back some of its government debts. This frightened lenders and investors worldwide because it showed that a major country could simply break its financial promises overnight, making people question who else might do the same. The shock contributed to the near-collapse of a giant US hedge fund, Long-Term Capital Management, which had to be rescued weeks later.
4. Feb. 22, 2001 · Turkey abandons lira's crawling peg amid banking crisis
   Turkey's government gave up its plan to gradually lower the lira's value in a controlled way and let the currency float freely after a political crisis and a run on the banking system made the peg impossible to defend. Banks and companies that had borrowed in dollars or euros were suddenly in deep trouble because their debts became far more expensive to repay in the now-cheaper lira. The International Monetary Fund stepped in with a large rescue package in the following months to prevent a complete economic collapse.
5. Jan. 15, 2015 · Swiss National Bank removes EUR/CHF 1.20 floor
   The Swiss central bank suddenly announced it would no longer hold the Swiss franc at a fixed minimum value against the euro, a policy it had maintained since 2011. This shocked everyone because traders, banks, and businesses had built plans assuming the floor would stay, so when it vanished, the franc's price jumped wildly in minutes and several currency brokers went bankrupt. In the following weeks, Switzerland's export-heavy economy struggled because Swiss goods became much more expensive for foreign buyers.

Assets named in this scenario · 6

Euro (EUR)Gold · Gold FuturesNestléSwiss Franc (CHF)UBS GroupZurich Insurance