Foreign exchange (FX) used to be the quiet nuts-and-bolts end of the capital markets, a business driven by real economic needs that stayed well below the radar while credit derivatives flew into trouble. But over the past year, FX markets have provoked heated debate in Switzerland, Scandinavia, Australia and elsewhere, as investors fleeing euro-denominated assets look for other developed markets in which to park their cash.
This has led to heavy intervention to stem appreciation against the euro or dollar, most spectacularly in Switzerland. Good business for the FX desks of investment banks, whose central bank clients have growing and increasingly complex needs.
