The Swiss franc slumped to the lowest level in ten months against the US dollar and the Japanese yen today. The currency also sank against its other major peers. The reason for the drop were speculations that if the European Central Bank eases monetary policy then the Swiss National Bank is going to follow suit.
Speculations that the ECB would stimulate the struggling European economy even more have been persisting for a while now. They made a fine job in weakening the euro. And while such outcome is welcomed by European policy makers, it is not good news for the Swiss central bank.
While the SNB has dropped the peg of the franc to the euro, it was still voicing desire to see the Swiss currency weaker. And negative interest rates were doing their job in keeping the franc in check. Yet if the ECB acts, weakening the euro, the SNB might have no choice but to cut rates deeper into negative territory in order to prevent appreciation of the franc versus the euro.
USD/CHF surged from 1.0237 to 1.0305 as of 17:24 GMT today, and its daily high of 1.0328 was the highest since January 15 when the SNB has lifted the ceiling on the franc, resulting in huge volatility on the market. EUR/CHF jumped from 1.0855 to 1.0919, trading near the highest level since October 13. CHF/JPY sank from 119.68 to 119.20, reaching the low of 118.71 — the weakest rate since January 15.
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