* Dollar, euro jump vs Swiss franc after SNB intervention
* SNB to buy foreign currencies to avert deflation risks
* SNB move to benefit other European emerging markets
(Recasts; updates prices)
By Nick Olivari
NEW YORK, March 12 (Reuters) - The U.S. dollar and euro
jumped against the Swiss franc on Thursday after the Swiss
National Bank said it was intervening in the foreign exchange
market as it faced the growing risk of deflation.
The Swiss central bank said it was implementing its
decision to buy foreign currencies and also cut interest rates
on Thursday by a quarter percentage point to a historic low,
offering three-, six- and 12-month funds at 0.05 percent.
The SNB, which last intervened in August 1995, said it will
buy not only foreign currencies but also bonds. Switzerland is
facing its worst recession in over three decades. For the SNB
statement, click on []
Karthik Sankaran, Portfolio Manager and Principal at
Covepoint Capital Advisors LLC In New York, called it a "very,
very strong statement from the Swiss National Bank about what
they are doing and about to do," adding:
"They are the first central bank that is actually using the
purchase of foreign currency as a means of quantitative
easing."
In late New York trading, the dollar rose 2.7 percent to
1.1841 francs <CHF=>, on track for its biggest one-day gain
since September 2008, at current prices. It rose as high as
1.1965 francs, a three-month high, according to Reuters data.
The Swiss franc is one of the world's most traded
currencies, at times prized as a safe haven for investors.
The euro climbed to 1.5313 Swiss francs, the highest since
December. It last traded at 1.5300 <EURCHF=>, up 3.4 percent,
the euro's best day ever against the Swiss currency.
SNB's move to near-zero rates and quantitative easing was
expected, traders said, but the immediate move to intervene was
a surprise.
Bank of New York-Mellon senior currency strategist Michael
Woolfolk said "the way this was communicated was intended at
maximizing its shock value." He said there were no hints from
SNB officials ahead of time that intervention would be
immediate.
"They changed their economic outlook; they not only lowered
interest rates to effectively zero but also announced
quantitative easing and currency intervention. This was the
full monty," Woolfolk said.
POLAND, HUNGARY BENEFIT FROM SNB ACTION
Quantitative easing has been deployed by central banks in
countries including Britain, where the central bank is buying
assets with newly created money.
Marc Chandler, global head of forex strategy at Brown
Brothers Harriman in New York, said the SNB intervention should
ease pressure on Poland and Hungary, two European emerging
market countries seriously hit by the global credit crisis.
These two countries had taken advantage of ultra-low Swiss
interest rates, borrowing heavily in Swiss francs and investing
in riskier assets.
"The strength of the Swiss franc compounded their woes.
Today's dramatic weakening of the Swiss franc may ease this
pressure," said Chandler.
The dollar fell 3.1 percent against the Hungarian forint on
Thursday <HUF=> and 3.5 percent against the Polish zloty
<PLN=>.
Gains in the dollar versus the Swiss franc boosted the
greenback against other major currencies such as the euro and
sterling.
The euro rose 0.8 percent to $1.2923 <EUR=>, though it had
been pressured for most of the day, as the impact of the euro's
rally against the Swiss franc spilled over into other pairs.
European Central Bank President Jean-Claude Trichet said
euro zone interest rates could be cut further. []
The ECB cut its benchmark rate to a record low 1.5 percent
last week and economists expect it to cut to 1.0 percent, most
likely in April.
Sterling rose 0.7 percent to $1.3950 <GBP=>.
The SNB news overshadowed all other events and data in the
market including U.S. retail sales numbers that were better
than expected and weekly jobless claims data that were not far
from analysts' forecasts. []
Against the yen, the dollar erased early losses, partly
because of firmer U.S. stocks, still one of the key drivers in
the currency market. Stocks were lifted by energy shares and
the U.S. retail sales report. The dollar rose 0.6 percent to
97.81 <JPY=>.
(Additional reporting by Steven C. Johnson and Gertrude
Chavez-Dreyfuss; Editing by James Dalgleish)
