CHF and JPY Rise After Swiss Shock

Both the Swiss franc and the yen will remain where traders flee for safety, despite the Swiss National Bank’s surprise move to remove its euro peg, say analysts.

“If anything, the Swiss central bank’s decision to remove the floor and cut interest rates will make the franc easier to flee to in times of uncertainty and volatility,” said Kengo Suzuki, chief currency strategist at Mizuho Securities. “Now that the Swiss franc can be traded freely, and borrowed cheaply because of the negative interest rates, it will remain, along with the yen, the safe haven currency of choice.”

Markets were caught off guard Thursday when the Swiss National Bank (SNB) canceled its policy pegging the exchange rate of the euro buying 1.20 Swiss francs, a policy put in place more than three years ago to keep the currency from getting too strong and hurting the economy. The SNB also cut interest rates deeper into negative territory, by 50 basis points to negative 0.75 percent, in an effort to help cushion the blow.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza