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Tuesday, 6 September 2011

SNB draws line in the sand to weaken franc – Reuters | Wall Street


ZURICH (Reuters) - The Swiss National Bank shocked foreign exchange markets by setting a minimum exchange rate target of 1.20 francs to the euro on Tuesday, saying it would enforce it by buying foreign currency in unlimited quantities.

The move immediately knocked around 8 percent off the value of the franc, which has soared as investors used it as a safe haven from the euro zone's debt crisis and stock market turmoil.

"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 SNB said in a statement.


"With immediate effect, it will no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20. The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities."

The SNB added that even at a rate of 1.20 francs to the euro, the franc was still high and should continue to weaken over time: "If the economic outlook and deflationary risks so require, the SNB will take further measures."

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