The Swiss franc dropped against its major counterparts in the European session on Thursday, after the Swiss National Bank lowered its policy rate by a quarter-point, as policymakers expect inflation to remain within the target range for the next few years.
The SNB unexpectedly lowered the policy rate by 25 basis points to 1.5 percent. Markets expected the bank to keep the rate unchanged.
The central bank said it remains willing to be active in the foreign exchange market as necessary.
The policy rate cut supports economic activity and today\'s easing ensures that monetary conditions remain appropriate, the bank said.
\"The SNB will continue to monitor the development of inflation closely, and will adjust its monetary policy again if necessary to ensure inflation remains within the range consistent with price stability over the medium term,\" the bank said.
The SNB downgraded inflation outlook for 2024 to 1.4 percent from 1.9 percent.
Similarly, the projection for 2025 was trimmed to 1.2 percent from 1.6 percent. The central bank sees inflation at 1.1 percent in 2026.
The central bank forecast the economy to grow by around 1 percent this year.
European stocks climbed as investors cheered dovish Fed comments suggesting that the U.S. central bank remains on track to cut interest rates three times in 2024.
The franc fell to more than a 4-month low of 0.8974 against the greenback, from a 3-day high of 0.8939 seen in the Asian session. At yesterday\'s close, the pair was quoted at 0.8868. If the currency falls further, it is likely to test support around the 0.92 region.
The franc declined to an 8-1/2-month low of 0.9782 against the euro and more than a 9-month low of 1.1459 against the pound, from yesterday\'s closing values of 0.9685 and 1.1338, respectively. The currency may locate support around 1.00 against the euro and 1.15 against the pound.
The franc weakened to a 2-day low of 168.51 against the yen, from a 3-week high of 170.80 hit at 3:55 am ET. The pair was worth 170.56 at yesterday\'s close. The franc is seen finding support around the 162.00 level.
Looking ahead, U.S. weekly jobless claims for the week ended March 16 and existing home sales for February will be out in the New York session.