The Swiss National Bank (SNB) said the cap, introduced in September 2011, was no longer justified.

At the same time it reduced a key interest rate from -0.25% to -0.75%, increasing the amount investors have to pay to hold Swiss deposits.

Swiss franc

Following the SNB move the Swiss franc went from 1.20 to the euro to 0.8052.

It later recovered in mid-morning trade close to 1.05.

Swiss shares fell some 6% and stock markets around Europe fell with investors buying ?safe haven? assets such as gold and German bonds.

Many investors believe that with the franc so strong Swiss companies will struggle to win exports.

Watchmaker Swatch saw its share price slump 15%. Swatch chief executive Nick Hayek called the decision ?a tsunami? for Switzerland?s economy.

Mark Haefele, chief investment officer of Swiss bank UBS, estimated that the move would cost Swiss exporters close to 5bn Swiss francs (?3.3bn), equivalent to 0.7% of Swiss economic output.

One trader described trading after the unexpected announcement as ?carnage?.

While the Swiss franc was held at 1.20 to the euro it had tracked the euro?s fall against the dollar.

ECB action

Many believe the euro will fall even further if the European Central Bank (ECB) starts quantitative easing, buying bonds to push cash into the eurozone banking system to stimulate a recovery.

Chris Beauchamp, market analyst at IG said: ?My initial reaction was that it is a sign the ECB is about to do something, which makes it odd that the reaction has been so negative across European stocks.

?However, it?s not every day that a central bank pulls the rug out from underneath something in such a massive way, and clearly people are worried that there?s something bigger afoot.?

Keeping the franc at 1.20 to the euro had became increasingly expensive for the SNB as it sold its own currency and bought up euros, sterling, US and Canadian dollars and yen, usually in the form of government bonds.

SNB foreign currency reserves have more than doubled since the cap was started in 2011 making it one of the five largest holders of foreign reserves in the world.

Source:? BBC

Disclaimer: News Ghana is not responsible for the reportage or opinions of contributors published on the website.

Send your news stories to [email protected] and via WhatsApp on +233 234-972-832 


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.