Car recommendations

[alocacoc]

1 Swiss Frank = above 37 Baht.

Euro falls further. Swiss Exchange crash.

ZURICH--Switzerland's central bank on Thursday scrapped its policy of capping the Swiss franc at 1.20 to the euro and said it would further lower the interest rate on bank deposits.

The Swiss National Bank said it would lower its 3-month Libor target range to minus 1.25% to minus 0.25% from the existing range of minus 0.75% to 0.25%, effective immediately.

The SNB will now charge banks 0.75% on deposits that exceed an exemption threshold by 0.5 percentage point. The bank had planned to introduce a 0.25% fee on Jan. 22--the same day the European Central Bank is expected to announce fresh stimulus, which will likely add to pressure on the SNB.

The minimum exchange rate was imposed in September 2011 to head off deflation and provide relief for the country's exporters, and has been the key pillar of the bank's policy ever since.

The SNB said while the Swiss franc is "still high" the "overvaluation has decreased" since the introduction of the cap more than three years ago.

"In these circumstances, the SNB concluded that enforcing and maintaining the minimum exchange rate for the Swiss franc against the euro is no longer justified," it said in a statement.

The SNB is also lowering rates "significantly" to ensure the scrapping of the cap for the franc doesn't lead to tighter monetary conditions.

The franc surged to parity with the euro, the currency of its leading export market, after the news.

Last month the SNB said it would charge banks for overnight deposits, but insisted the currency cap remained its key policy instrument.

Analysts said Thursday's move to scrap the cap was a surprise that could seriously undermine the SNB's future credibility. "This seems like a desperate move from the SNB," said Esther Reichelt, a currency analyst at Commerzbank. " It seems their willingness to intervene is not big enough."

The SNB's decision to introduce negative interest rates comes after months of pressure on the franc, which has risen to near 1.20 a euro, a level the central bank has pledged to defend for almost 3 1/2 years.

A strong franc, which has benefited from haven buying and the malaise in the eurozone economies, raises the risk of deflation, a damaging spiral of lower prices and slowing spending, and creates headwinds for the country's exporters, many of whom depend on the European Union as an important market. A stronger currency makes exporters' goods sold abroad less competitive.

John Revill contributed to this article.

Write to Neil MacLucas at [email protected]

Access Investor Kit for Schweizerische Nationalbank

Visit http://www.companyspotlight.com/partner?cp_code=P479∈=CH0001319265

  (END) Dow Jones Newswires  01-15-15 0615ET  Copyright (c) 2015 Dow Jones & Company, Inc.

Edited January 15, 2015 by alocacoc

[Rimmer]

Nothing to do with Pattaya or Thailand

//CLOSED//