[LONDON] The Swiss franc fell one per cent against the dollar and dropped against the euro on Wednesday after the Swiss National Bank said it was reducing considerably the number of institutions exempt from negative rates on cash deposits held at the central bank.
Analysts said the move increased the chances that the SNB could take interest rates deeper into negative territory, especially if flows into the safe-haven Swiss franc increase due to Greece's debt problems in the eurozone.
The dollar rose one per cent against the Swiss franc to trade at 0.9655 francs, while the euro was up 0.8 per cent at 1.0335 francs. The euro had fallen to its lowest in nearly three months on Tuesday, on growing expectations that Greece could default and eventually leave the currency union.
"The SNB move to tighten its rule on sight deposits increases the odds that it will go for more negative interest rates, especially faced with the risk of a Greek event," said Sebastien Gely, currency strategist at Societe Generale.
The SNB charges 0.75 per cent on some Swiss franc deposits to try to deter speculative flows into the currency. This measure has also hit Swiss savers and the 673 billion Swiss franc (S$949 billion) pension fund industry, which is subject to fees on its franc deposits.