Swiss National Bank pegs franc to euro

By the Associated Press | September 6, 2011 | 4:30 AM EDT

GENEVA (AP) — The Swiss National Bank has decided to fix the country's exchange rate at 1.20 francs per euro and indicated it would buy an unlimited amount of euros regardless of the risk to maintain that value.

The central bank announced the decision Tuesday because of what it called "the current massive overvaluation of the Swiss franc."

The euro, which had been trading arond 1.10 francs before the announcement, shot up to 1.2024 afterwards.

The SNB said the overvaluation poses "an acute threat to the Swiss economy" that depends on exports and tourism.

It said in a statement that it "is prepared to buy foreign currency in unlimited quantities."

It said it will "no longer tolerate" an exchange rate below the minimum rate of 1.20 francs, which it said is still high.