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.
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