The marriage between the Swiss franc and the Euro is officially over. But the fallout from their separation is still to be determined.
Switzerland is known for its delicious chocolates snowcapped mountains and sparkling lakes, but the quiet, picturesque country rocked the financial world Thursday with a dramatic change to its monetary policy. The Swiss central bank dropped a three-year-old cap on the Swiss franc because bank officials said it was unsustainable.
"The euro distinctly lost value against the U.S. dollar which is why the Swiss franc also lost value against the U.S. dollar," Swiss National Bank's Chairman Thomas Jordan said. "In light of this, the Swiss National Bank decided that it doesn't make sense to carry on with a policy that is not sustainable and that can only be carried out by constantly intervening in the market."
The Swiss Franc has been linked to the Eurozone's shared currency since 2011. Its exchange rate was one-point-two-zero franc per euro.
"The limit was introduced at a time of extreme overrating of the Swiss franc and massive uncertainty on financial markets. This extraordinary and temporary measure saved the Swiss economy from serious damage," Jordan said.
The bank's decision to break up with the euro sent the franc, also known as the Swissie, soaring. But currency traders weren't the only ones cashing in. There was a surge in business at exchange windows throughout Switzerland.
And that's what several Swiss company executives are worried about-- the consequences. They say the exchange rate decision spells trouble for an economy that depends heavily on exports.
They say the new policy will ultimately make them less competitive in international markets.
Investors will now wait for the first round of 2015 earnings reports to find out if a stronger Swiss franc will make their high-end ski resorts and luxury timepieces too expensive for customers outside of Switzerland's borders to enjoy.