US Dollar Plunges 28.34% and Euro Plunges 28.8% vs. Swiss Franc

The Swiss National Bank (SNB) has pulled the floor from the Euro by ending the Swiss Franc’s peg that supported the Euro’s value at 1.20 Swiss Francs. This move is a major surprise because the SNB fought hard to encourage its citizens to reject a recent gold referendum — citing that its passage would prevent them from maintaining their Euro peg.

The SNB had been engaged in printing Swiss Franc to buy Euros, every time the EURCHF exchange rate declined to 1.20, not allowing the Euro’s value to decline below 1.20 Swiss Francs. Since implementing this support of the Euro in late-2011, the SNB’s foreign currency reserves exploded from CHF257.5 billion in 2011 to CHF475.6 billion in November 2014, an increase of 85%. The SNB’s Euro holdings increased from €120.485 billion in 2011 to €174.335 billion in November 2014, an increase of 44.7%. The SNB’s US Dollar holdings increased from $62.945 billion in 2011 to $142.366 billion in November 2014, an increase of 126.2%. The SNB recently reported that its total foreign currency reserve holdings increased by CHF27.5 billion in December, most likely from the heavy buying of Euros.

After announcing the end of the peg this morning, the EURCHF exchange rate plunged from 1.20 to a low of 0.8546 for an initial decline in the Euro of 28.8% vs. the Swiss Franc. The EURCHF exchange rate has since rebounded to 1.0458 with the Euro currently down 12.85% for the day vs. the Swiss Franc.

The USDCHF exchange rate plunged following the news from 1.02 down to a low of 0.7309 for an initial decline in the US Dollar of 28.34% vs. the Swiss Franc. The USDCHF exchange rate has since rebounded to 0.89 with the US Dollar currently down 12.74% for the day vs. the Swiss Franc.

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