The government action to support the Swiss baking sector is likely to be a short-term positive for the franc on relief that action is being taken, but there will be increased doubts over the longer-term outlook.
The Euro hit tough resistance near 1.55 against the franc on Wednesday and dipped to lows beyond 1.5300. The franc gained support from a renewed plunge in global stock markets. There were also further important stresses within Eastern European currencies which provided some net support to the franc as loans were curbed.
The ECB and Swiss National Bank announced that they would provide additional franc liquidity to ease funding pressures. Global fears dominated and the franc dipped to beyond 1.1450 against the dollar with renewed support against the Euro.
The Swiss authorities provided support for the main Swiss banks as confidence surrounding the sector deteriorated. The government will take a stake in UBS and the bank's non-performing loans of up to CHF60bn would be transferred out of the bank into a new fund.
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