On Thursday the euro dropped to multi-year lows against the greenback and Swiss franc after the Swiss National Bank abandoned its exchange
rate cap against the European currency and cut interest rates further into
negative territory.
EUR/USD hit lows of 1.1580, the weakest since November 2003 before trimming losses to trade at 1.1681, still down 0.89% for the day.
EUR/CHF hit lows of 0.7710 following the announcement, before pulling back to 1.0277, a drop of 14.23% for the day.
The Swiss National Bank surprised
markets by scrapping the 1.20 per euro exchange rate floor it imposed in
September 2011, in a bid to battle deflation and prevent the
continued appreciation of the safe-haven franc against the single
currency. The central bank also cut rates to minus 0.75%, from minus 0.25% before. The moves sent the euro lower.
"This exceptional and temporary measure protected the Swiss economy from serious harm. While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate," the SNB said in statement.
The move signaled that the SNB sees a high likelihood that the European Central Bank will implement quantitative easing measures at its upcoming meeting next week.
