US dollar gained on Tuesday against its major counterpart currencies despite the news that Swiss National Bank decided to set a floor on the euro exchange rate against the Swiss franc. The 17-nations shares currency took heavy beating and dropped below the level of $1.40 in reaction to which greenback benefited the most. The euro fell 0.6 percent against the US dollar on Tuesday whereas touched its intraday high of 1.4218 against the US dollar. The euro however gained versus the Swiss franc to 1.20 on Tuesday as compared to 1.12 on Monday’s European trading session.
One of the major reasons for the appreciation of single currency against the Swiss franc was the following statement issued by Swiss Central Bank:
“The current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development, with immediate effect, it [the SNB] will no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20. The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities.”
The dollar index DXY which measures the greenback’s movement against its major rival currencies surged 0.9 percent to 76.993 on Tuesday. The US dollar surged 9.7 percent against the Swiss franc to 86.23 which also happens to be its biggest gain in single day since 1991.
The US dollar also soared 1 percent against the Japanese Yen to 77.69 on Tuesday. Among other currency the British Pound also fell 1 percent to 1.5938 against the US dollar while the Australian dollar dropped 0.23 percent to 1.0490 versus the greenback despite the decision of Australian Central Bank to keep its interest rates at record lows.