Swiss franc soars

Frances colour

The Swiss franc soared as much as 30% in chaotic trade yesterday after the central bank abandoned the cap on the currency’s value against the euro.

The Swiss National Bank (SNB) said the cap, introduced in September 2011, was no longer justified.

It also cut a key interest rate from -0.25% to -0.75%, raising the amount investors pay to hold Swiss deposits.

Christine Lagarde, the International Monetary Fund’s head, called the move “a bit of a surprise”.

She said she was also surprised that the governor of the Swiss National Bank had not contacted her, and said she hoped he had communicated the plan to his fellow central bank governors.

Following the SNB move the euro went from buying 1.20 francs to buying just 0.8052, but it later recovered to buy 1.04.

Elsewhere Swiss shares closed down 9% and stock markets around Europe fell with investors buying “safe haven” assets such as gold and German bonds.

Many investors believe that with the franc so strong Swiss companies will struggle to maintain export levels.