|01-15-2015, 10:46 PM||#1|
SNB abandons minimum exchange rate, cuts interest rate to -0.75%
The Swiss National Bank (SNB) surprisingly ended its EURCHF minimum exchange rate of 1.20 franc/euro and pushed its interest rate deeper into negative territory.
In an unexpected decision on Thursday, the SNB cut its three-month LIBOR rate to -0.75% from -0.25%, in an attempt to control the persistent rise of the franc, a headwind that has always rattled the Swiss economy.
The franc cap, introduced in September 2011 to shore up the economy from an overvalued currency, is "no longer justified" according to the bank.
"While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate. The economy was able to take advantage of this phase to adjust to the new situation," the bank said in a statement.
Volatility was clearly evident across the FX markets following the SNB surprise. The EURCHF slumped sharply to 1.0261 — a level not seen since August 2011.
The EURUSD hit a fresh nine-year low of 1.1570 before paring losses to trade around 1.1718 as of 09:50 GMT.
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