Investing.com - The Swiss National Bank announced Thursday that it would discontinue the minimum exchange rate of 1.20 per euro, while lowering interest rates further into negative territory, sending the franc sharply higher.
The SNB introduced a negative exchange rate of -0.75% on sight deposit account balances from a previous rate of -0.25% in a surprise decision.
The SNB is lowering interest rates significantly to ensure that the discontinuation of the minimum exchange rate does not lead to an inappropriate tightening of monetary conditions.
The central bank will continue to take account of the exchange rate situation in formulating its monetary policy in future. If necessary, it will therefore remain active in the foreign exchange market to influence monetary conditions.
The Swiss franc rallied sharply following the announcement, with EUR/CHF plunging to 0.9476 from 1.2009 earlier. USD/CHF hits lows of 0.8462 from around 1.0218 ahead of the announcement.
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