Investing.com - The euro fell to multi-year lows against the Swiss franc and the dollar on Thursday after the Swiss National Bank abandoned its exchange rate cap against the single currency and cut interest rates deeper into negative territory.
The drop in the euro came after the Swiss National Bank surprised markets by scrapping the 1.20 per euro exchange rate floor it imposed in September 2011, in a bid to stave off deflation and prevent the continued appreciation of the safe-haven franc against the single currency.
The central bank also cut rates to minus 0.75%, from minus 0.25% before.
"This exceptional and temporary measure protected the Swiss economy from serious harm. While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate," the SNB said in statement.
EUR/CHF hit lows of 0.7710 following the announcement, before pulling back to 1.0277, a drop of 14.23% for the day.
The move indicated that the SNB sees a high likelihood that the European Central Bank will implement quantitative easing measures at its upcoming meeting next week.
EUR/USD hit lows of 1.1580, the weakest since November 2003 before trimming losses to trade at 1.1681, still down 0.89% for the day.