6 Sep 2011

Swiss draw line in sand to weaken currency

11:33 pm on 6 September 2011

The Swiss National Bank has shocked foreign exchange markets by setting a minimum exchange rate target of 1.2 francs to the euro, knocking back a surge in its currency that threatened Switzerland's economy with recession.

Using some of the strongest language by a central bank in the modern era, the bank says it will buy other currencies in unlimited quantities and use all means within its power to hold to the target, Reuters reports.

The move immediately knocked about 8% off the value of the franc, which has soared by a third since the collapse of Lehman Brothers in 2008, with investors using it as a safe haven from the euro zone's debt crisis and stock market turmoil.

The move has prompted speculation that Japan might follow suit to cap the rising yen.