Investing.com -- The Swiss franc plunged more than 1.6% against the dollar on Wednesday, after the Swiss National Bank curtailed the number of deposit holders that are exempt from negative interest rates.
The negative interest rates will now be applicable to holders in certain public accounts, including PUBLICA, the confederation's federal pension fund and the Central Bank's own pension fund. The policy move could be viewed as an indication that the Swiss National Bank has been ineffective in driving capital away from the franc.
USD/CHF gained 0.0157 or 1.64% to 0.9709 in U.S. afternoon trading. The pair is up by more than 15% since Jan. 15 when the Bank spooked markets by removing a three-year cap of 1.20 francs per euro. It was believed that the SNB abandoned the peg to the euro as a way off fighting off deflation before the European Central Bank started an ambitious €60 billion a month quantitative easing program.
Under the new policy, the groups will be charged a rate of 0.75% on deposits exceeding CHF 10 million. A select group of deposit account holders will still be exempt from the negative interest rates, according to the SNB.
"In the future, the only sight deposit accounts to be exempt from negative interest will be those of the central Federal Administration and the compensation funds for old age and survivors’ insurance, disability insurance and the fund for loss of earned income," the SNB said in a statement.
Elsewhere, EUR/USD pared earlier gains after the release of a wave of strong U.S. housing data. The National Association of Realtors said on Wednesday that existing home sales increased 6.1% last month to 5.19 million, its highest level in 18 months. Economists polled by Reuters expected the figure to tick up to increase to 5.03 million.
Separately, the Mortgage Bankers Association said mortgage applications swelled by 5% for the week ending April 17, marking its fourth increases over the last five weeks. A decrease of four basis points in mortgage rate in comparison with the prior week helped boost demand.
The Federal Housing Finance Agency (FHFA) also said Wednesday that its House Price Index (HPI) ticked up 0.7% in February, above a 0.4% increase a month earlier. The index, which covers single-family housing by evaluating data compiled by Fannie Mae and Freddie Mac, increased 5.4% on a year-over-year basis. In its previous monthly report, the FHFA said the index rose 5.1% from its level during the same period last year.
EUR/USD fell to 1.0725 in U.S. afternoon trading, down from 1.0799 in the morning session -- its highest level since April 20.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, ticked up to 98.24 -- a slight increase of 0.12 in U.S. afternoon trading.