The Swiss franc tumbled, dropping the most ever against the euro, after the nation’s central bank set a minimum exchange rate of 1.20 per euro and said it will defend the target with the “utmost determination” if needed.
Switzerland’s currency snapped four days of gains versus the euro, falling as much as 8.7 percent and declining to the weakest level since July. The franc depreciated at least 7 percent against all 16 of the most traded currencies with the biggest decline versus South Africa’s rand. The euro snapped five days of losses against the dollar as European stocks advanced.
“The SNB has set a line in the sand,” said Peter Rosenstreich, the chief currency analyst at Swissquote Bank SA in Geneva. “This type of peg was not expected. We’ll continue to see demand for the franc, especially against the euro, given the rise in risks from both Europe and the global slowdown. How they defend this will be a very expensive strategy.”