Switzerland’s franc weakened the most in 18 months versus the euro after the nation’s central bank introduced negative interest rates to defend the currency’s cap.
The shared currency fell for a second day against the dollar as the Swiss National Bank decision boosted speculation the European Central Bank will expand stimulus measures next year. A gauge of the dollar reached a five-year high amid signals the Federal Reserve’s pledge to be “patient” on interest rates means an increase next year. Colombia’s peso gained for a third day to lead most of its emerging-market peers higher. The pound gained as volatility rose to a 15-month high.
Switzerland’s move was a “telltale sign that the SNB is cautious because of the ECB,” said David Song, a New York-based currency analyst at FXCM Inc. “The SNB is going to follow along with the ECB in terms of the easing cycle.”