The Swiss central bank moved this morning to stem the rise in the strong Swiss franc, which it said was overvalued and posing a threat to the economy.
The bank said it would significantly increase the supply of liquidity as well as cut its already very low benchmark lending rate, after the franc climbed to all time highs in recent days against the euro and the dollar on growing fears over the European and US public debt crisis.
The measures led to an immediate initial reaction in the markets, with the franc weakening against the euro and the dollar.
For the Swiss National Bank, the franc is 'massively overvalued at present' and threatening the Swiss economy. With the global economic outlook also weak, it added that the outlook for the Swiss economy had 'deteriorated substantially'.
It announced that it would aim for a three-month interest rate as close to zero as possible, down from the current 0.25%.
The Swiss franc has risen sharply in recent months to record highs as investors seek a safe haven for their money amid growing fears over the euro zone debt crisis and a weakening economic outlook.
