Switzerland Intervenes To Weaken The Franc
The reason for this unusual move was that the Swiss National Bank not only cut short-term interest rates to 0.25%, but also announced that it will actively intervene to weaken the franc.
The franc is the only European currency to have actually gone up in value against the euro. Other have either been stable (because their central banks pursue a fixed exchange rate policy) or have fallen in value against the euro, often dramatically.
The Swiss National Bank is no longer the relative hard money central bank that it used to be, which is why I recently stopped being bullish on the franc. Yesterday's announcement makes the case even stronger for a bearish view.
One good thing about this is that it could reduce the problems that many Austrian and other Western European banks have in Eastern Europe. One source of the problems was that many in Eastern Europe borrowed in terms of francs, and so when it rose sharply against the Eastern European currencies, the debt burden for the borrowers soared. The franc had already fallen some 5% from its highs against the Polish zloty, and today it then fell another 3%, reducing the debt burden for Poles that borrowed in francs by 3% at the same time.