Increased Safe Haven Demand Spurs SNB into Action
The Franc has come under heavy pressure as investors piled into the currency in an attempt to find safer havens as an economic crisis in Russia and the threat of further stimulus measures being introduced by the Eurozone spooked the markets. The surge in demand for safer assets has put the banks exchange rate policy under pressure and spurred the Swiss national bank to introduce a negative deposit rate to help maintain the currency’s ceiling of 1.20 per Euro.
The negative rate will see a charge of 0.25% being imposed on the deposits of commercial banks at the central bank and will be introduced on January 22nd, the same date as the European Central Bank’s next policy meeting.
The central bank reiterated its commitment to maintaining the minimum exchange rate of CHF 1.20 per euro, and said it will continue to enforce it with the “utmost determination.”
‘Over the past few days, a number of factors have prompted increased demand for safe investments. The introduction of negative interest rates makes it less attractive to hold Swiss Franc investments and thereby supports the minimum exchange rate,’ the SNB said in a statement.
Following the announcement, the Swiss Franc fell against the Pound, Euro and most other major peers.
Further losses for the Swiss Franc were somewhat restrained after data showed that the nation’s exports increased by 1.9% in November. According to the Federal Customs Office, the Alpine nation’s trade surplus rose to 3.87 billion Francs in November.
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