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The Swiss National Bank (SNB) President Thomas Jordan said at a press conference on Thursday that the CHF1.20 exchange rate floor has been discontinued because it was unsustainable.
"The euro has depreciated substantially against the US dollar and this, in turn, has caused the Swiss franc to weaken against the US dollar. In these circumstances, the SNB has concluded that enforcing and maintaining the minimum exchange rate for the Swiss franc against the euro is no longer justified", Jordan said.
He added that surprise was necessary.
Jordan pointed out that the overvaluation of the Swiss franc has declined since the introduction of the exchange rate floor but the currency remains high.
The SNB president noted that the SNB will intervene in the foreign exchange markets if required.
Switzerland's central bank will lower the interest rate for sight deposit accounts to -0.75% from 22 January. The target range for the 3-month Libor is being cut by 0.5% to between -1.25% and -0.25%.
The SNB capped the franc at 1.20 per euro in September 2011. It had intervened heavily in 2012 to defend the cap. The Swiss National Bank's foreign exchange reserves increased in December. That indicates that the Swiss National Bank's (SNB) has intervened in currency markets last month.
Jordan also said that inflation in Switzerland is expected to -0.1% in 2015 due to falling oil prices. He added that lower oil prices will stimulate the global economy.
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