Tuesday, 6 September 2011

Switzerland move threatens currency war

Switzerland is moving aggressively to weaken its franc and protect exports from watches to chocolates, sparking fears of an escalating currency war that would ripple through markets and other economies.

For months, the Swiss National Bank tried to rein in its surging currency by lowering interest rates and injecting francs into the market, but that did little to dissuade investors who viewed the franc as one of the few safe places to keep their money in a world of economic turmoil.

On Tuesday, the central bank decided it would wait no longer, setting a minimum exchange rate of 1.20 francs per euro. Investors immediately sold the currency, which sank by about 8 per cent to the SNB’s target level...

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