SWITZERLAND’S CENTRAL BANK has introduced negative interest rates to cap its rising currency after Russians poured their cash into the financial safe haven.
Its official lender said it was putting in place a -0.25% rate on certain quick-access deposits in a bid to keep a lid on the Swiss franc.
National bank chairman Thomas Jordan said “rapidly-mounting uncertainty on the financial markets” had dramatically increased the demand for secure investments like the currency.
The worsening of the crisis in Russia was a major contributory factor in this development,” he said.
The rouble has become the new lira in recent months – shedding about half its value against the US dollar this year, including a vicious 20% plunge this week.
Currency crisis still deepening
Russians have reportedly started panic-buying everything from the foreign currency to food staples like buckwheat as the currency crisis continued to deepen on the back of falling oil prices and economic sanctions.
Switzerland normally sees money flow into its currency and accounts in times of economic strife, but the new negative interest rate means investors would effectively have to pay to park their cash in its coffers.
In 2011 it set a target of 1.20 francs to the euro to protect its exports, but that rate has already been under pressure with the falling value of the common currency.
- with AFP
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