Swiss National Bank scraps euro cap
(Reuters) – The Swiss National Bank unexpectedly scrapped its cap on the franc on Thursday, sending the safe-haven currency crashing through the 1.20 per euro limit it set more than three years ago.
Minutes after the announcement the franc had soared by almost 30 percent in value against the euro. SNB vice-chairman Jean-Pierre Danthine had said as recently as Monday that the cap would remain the cornerstone of its monetary policy.
“This is a very risky move. You can see that in the market reaction that is extreme,” Sarasin economist Alessandro Bee said.
In its second surprise announcement in as many months, the SNB said it would discontinue the cap it introduced on Sept. 6, 2011 to fight recession and deflation threats after investors fleeing the euro zone crisis pushed the franc to record highs.
“This exceptional and temporary measure protected the Swiss economy from serious harm. While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate,” the SNB said in a one-page statement.
…click on the above link to read the rest of the article…
