Forexpros – The euro jumped to an eight-week high against the Swiss franc on Tuesday, after the Swiss National Bank intervened in currency markets, setting an exchange rate target at 1.20 francs per euro.
EUR/CHF pulled away from 1.1017, the daily low, to hit 1.2029 during European morning trade, leaping 8.40%.
The pair was likely to find short-term support at 1.1908, the low of July 8 and short-term resistance at 1.2168, the high of the same day.
The SNB announced earlier that it had set a minimum exchange rate target of 1.20 per euro for the Swiss franc, saying the massive overvaluation of the currency posed an acute threat to the Swiss economy and carried a risk of deflation.
“The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities,” the bank said.
The announcement came after official data showed that Swiss consumer price inflation fell 0.3% in August, after dropping by 0.8% the previous month, surpassing expectations for a 0.2% decline.
The European Central Bank said the SNB had made the decision of its own accord.
The euro was also sharply higher against the yen following the move, with EUR/JPY rallying 0.93% to hit 109.39.
Expectations of an intervention by the SNB had mounted in recent days after the Swiss government issued a statement late last week in support of the central bank’s actions and asserting that the central bank was solely responsible for currency policy.
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