Forex Market News – EURCHF breaks below SNB 1.20 floor

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Euro fell sharply against the dollar during European trading hours amid concerns about the euro zone debt crisis and particularly Spanish debt spiralling out of control after a weak debt auction on Wednesday. Rising Spanish and Italian bond yields are weighing on the single currency.


Meanwhile yesterday the European Central Bank kept rates at 1.0 percent and ECB President Mario Draghi said “downside risks to the economic outlook prevail” .  EURUSD opened in Europe at 1.3150 and slipped over 100 pips to 1.3056, the lowest level in over three weeks.


Sterling fell sharply against the dollar after data showed UK manufacturing output unexpectedly fell despite forecast for a slight rise in February. GBPUSD slid to a session low of 1.5816 from 1.5907. Cable remained steady after the bank of England announced interest rates remained unchanged at 0.5 percent, as expected and did not make adjustments to its bond-buying program. Markets interpreted this as possible signs that the U.K. economic recovery may be on track at least for now.


Against the Swiss franc, euro fell and broke past the 1.20 franc exchange rate floor that was set by the Swiss National Bank in September last year to curb franc strength.   A SNB spokesman subsequently said an exchange rate below 1.20 francs would not be tolerated and there were reports that the SNB was was seen buying euros against the Swiss franc to defend the 1.20 franc exchange rate floor. EURCHF fell to 1.1996 at around 09:40 GMT before bouncing back up above the floor and was last trading around 1.2022.


Euro was under pressure against the broadly stronger  yen, falling for a fourth straight day as risk aversion led to safe haven flows to the safer Japanese currency. EURJPY touched a three week low of 106.87, versus an early session high of  108.37.


USDJPY extended losses during European session, touching a low of 81.89, versus the Tuesday high of 82.98 when the dollar shot up after the Federal Reserve minutes.