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Markets rocked after Swiss central bank abandons its currency cap

Switzerland's central bank has surprised the markets by abandoning a currency cap. The franc surged as much as 39% against the euro and the dollar as a result of the Swiss National Bank's decision to lift its SFr1.20 cap, which is understood not to have been made as part of a co-ordinated policy with other central banks. The move is believed to be in anticipation of The European Central Bank's expected large-scale sovereign bond buying programme aimed at reviving growth and saving the eurozone from deflation. If ECB president Mario Draghi announces a mass quantitative easing plan, then demand for the Swiss franc would soar as it is considered one of global markets' stronger havens. The bank's move was greeted with dismay by Switzerland's exporters, as a stronger franc will make their products more expensive abroad.

 

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