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SWISS BANK INTRODUCES NEGATIVE INTEREST RATES

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SWISS BANK INTRODUCES NEGATIVE INTEREST RATES

Dec 18 2014, 10.00am GMT

STOCK.com

The Swiss franc loses against the US dollar and euro.

Safe haven Swiss national Bank is imposing an interest rate of –0.25% on sight deposit account balances. On the news, the Swiss franc lost against major currencies, taking the USDCHF from 0.9720 to highs of  0.9845 and the EURCHF from 1.2007 to as much as 1.2095.

As ZEW economic expectations increase for Switzerland, and investors find a safe haven in the Swiss currency, the SNB has announced that it “is imposing an interest rate of –0.25% on sight deposit account balances at the SNB, with the aim of taking the three-month Libor into negative territory. It is thus expanding the target range for the three-month Libor to –0.75% to 0.25% and extending it to its usual width of 1 percentage point. Negative interest will be levied on balances exceeding a given exemption threshold.

The SNB reaffirms its commitment to the minimum exchange rate of CHF 1.20 per euro, and will continue to enforce it with the utmost determination. It remains the key instrument to avoid an undesirable tightening of monetary conditions resulting from a Swiss franc appreciation. Over the past few days, a number of factors have prompted increased demand for safe investments. The introduction of negative interest rates makes it less attractive to hold  Swiss franc investments, and thereby supports the minimum exchange rate. The SNB is prepared to purchase foreign currency in unlimited quantities and to take further measures, if required.”

The interest rate is currently -0.25% p.a.

Negative interest will be charged as of 22 January 2015 until further notice.

ZEW-CS-Financial Market Test Switzerland - Pessimistic Sentiment Alleviates

In December 2014, the economic expectations for Switzerland continue to approach a balanced level of zero points. The indicator improves from minus 7.6 to now minus 4.9 points. The surveyed analysts therefore seem to expect only a slight slowdown of the Swiss economy in the first six months of 2015. The ZEW-CS Indicator reflects the expectations of the surveyed financial market experts regarding the economic development in Switzerland on a six-month time horizon.

In December the balance of the current economic situation stands at a level of 29.3 points. Compared to the previous month, it has improved by 8.8 points. There is, however, a major gap with respect to the assessment of the economic activity in the euro area and the US, the two most important sales markets for Swiss exports. While the indicator for the euro zone points to a very difficult economic environment, standing at minus 70.0 points, the estimate for the US is highly positive, standing at plus 60.0 points. There has never been such a pronounced difference between the assessment of the economic outlook of the US and the euro zone since the launch of the survey.

MT4 chart: USDCHF

USDCHF on stock.com

MT4 chart: EURCHF

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