This article is from the source 'bbc' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.bbc.co.uk/go/rss/int/news/-/news/business-14801324
The article has changed 8 times. There is an RSS feed of changes available.
Version 0 | Version 1 |
---|---|
Swiss National Bank acts to weaken strong franc | |
(40 minutes later) | |
The Swiss National Bank (SNB) has set a minimum exchange rate of 1.20 francs to the euro, saying the current value of the franc is a threat to the economy. | The Swiss National Bank (SNB) has set a minimum exchange rate of 1.20 francs to the euro, saying the current value of the franc is a threat to the economy. |
The SNB said it would enforce the minimum rate by buying foreign currency in unlimited quantities. | The SNB said it would enforce the minimum rate by buying foreign currency in unlimited quantities. |
The move had an immediate effect, with the euro rising from about 1.10 francs before the announcement to 1.21 francs. | The move had an immediate effect, with the euro rising from about 1.10 francs before the announcement to 1.21 francs. |
It is the latest attempt by the central bank to weaken its currency, which has been at export-damaging record highs. | It is the latest attempt by the central bank to weaken its currency, which has been at export-damaging record highs. |
The SNB has previously said that it would increase available deposits to commercial banks, as well as cut interest rates. | The SNB has previously said that it would increase available deposits to commercial banks, as well as cut interest rates. |
The Swiss government has also said it would increase its spending by 2bn francs to help boost the domestic economy. | The Swiss government has also said it would increase its spending by 2bn francs to help boost the domestic economy. |
'Utmost determination' | |
In a statement, the SNB said: "The current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development. | |
"The Swiss National Bank is therefore aiming for a substantial and sustained weakening of the Swiss franc. With immediate effect, it will no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20. | |
It is a measure of last resort for a country which has worked so hard to stay independent from Europe - but the SNB clearly feels it no longer has a choice. | |
The move follows months of anxiety here - the franc has risen over 20% against the euro in the last year, threatening Switzerland's export market and its tourism industry. | |
Earlier attempts to stem the franc's rise had little effect, and predictions just this week of 25,000 job losses clearly convinced the SNB that drastic action was necessary. | |
But business leaders say a level of 1.20 francs to the euro is still too high - 1.30 or more is their preferred rate, so worries over Switzerland's traditionally strong economy remain. | |
"The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities." | |
The Swiss stock market, the Zurich SMI, rose 4% after the announcement, with exporters the biggest risers. | |
'Grand scale' | |
The European Central Bank issued a short statement saying the decision had been taken by the Swiss National Bank "under its own responsibility". | |
Jeremy Cook, chief economist at World First, said the resulting currency movement was "the single largest foreign exchange move I have ever seen". | |
Against the franc, the euro climbed 9%, the dollar rose 7.7% and sterling gained 7.8% within minutes of the announcment. | |
"This dwarfs moves seen post-Lehman Brothers, 7/7, and other major geopolitical events in the past decade," Mr Cook said. | |
"The Swiss have had enough. This is intervention on a grand scale. | |
"This turns up the heat on the eurozone and other economies who have benefited from weakening their currency in the past couple of years." |