Swiss Franc (FXF) Tumbles After SNB Meeting

The Swiss Franc (CHF) is getting hit today in currency markets after the Swiss National Bank kept the interest rates unchanged this morning and cut its inflation outlook for both this year and the next. The SNB lowered inflation expectations from 0.9% to 0.7% for this year and from 1% to 0.3% for 2011. While the interest rate decision was mostly expected, it was the change in inflation outlook that caused the sell-off. When abandoning its active intervention policy against a strong Franc in June, the SNB announced that it would intervene in the future if deflationary danger appears again. The lower inflationary outlook, therefore, was interpreted by the markets as the first sign of deflationary danger, which means a higher probability that the SNB will resume the policy of active intervention again. The Swiss currency fell against the US Dollar (

), Euro (EUR), Japanese Yen (

) and pretty much against all of its major counterparts. The USD/CHF shot up to 1.0170 from the parity level it only reached two days ago and currently is trading around 1.0130s. The EUR/CHF, jumped from 1.31 to 1.33, while the CHF/JPY plunged from 85.60 all the way to 84.17.