Forexpros – The U.S. dollar was down against most of its major rivals on Tuesday, after Switzerland’s central bank intervened in currency markets to weaken the Swiss franc, sending the currency sharply higher against the greenback and the euro.
During European morning trade, the greenback jumped against the Swiss franc, with USD/CHF leaping 7.82% to hit 0.8487.
Earlier in the day, the Swiss National Bank announced that it had set a minimum exchange rate target of 1.20 per euro for the Swiss franc, adding that it was prepared to enforce this minimum rate with the utmost determination by purchasing foreign currency in unlimited quantities.
The central bank said the massive overvaluation of the franc posed an acute threat to the Swiss economy and carried a risk of deflation.
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 Swissie was also sharply lower against the euro, with EUR/CHF jumping 8.44% to hit 1.2034.
Elsewhere, the greenback was down against the euro, with EUR/USD climbing 0.58% to hit 1.4180.
Concerns over the sovereign debt crisis in the euro zone continued to focus on Italy, as ongoing uncertainty over the implementation of a government austerity package saw the country’s borrowing costs surge.
The greenback was also lower against the pound and the yen, with GBP/USD easing up 0.01% to hit 1.6119 and USD/JPY climbing 0.40% to hit 77.20.
Elsewhere, the greenback was lower against its Canadian, Australian and New Zealand counterparts, with USD/CAD dipping 0.07% to hit 0.9897, AUD/USD rising 0.23% to hit 1.0577 and NZD/USD adding 0.26% to hit 0.8343.
Earlier Tuesday, the Reserve Bank of Australia left its interest rate on hold at 4.75%, and indicated that rates are likely to remain on hold in the coming months amid concerns over the outlook for global growth.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was almost unchanged, dipped 0.01% to hit 75.20.
Later Tuesday, the Institute of Supply Management was to produce a report on U.S. service sector activity.
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