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By Bloomberg

The Swiss National Bank’s surprise decision to abandon the franc’s cap against the euro, two days after an official reaffirmed it would remain a pillar of policy, roiled currency markets.

The euro slumped 1.8 percent against the dollar before recouping the majority of its decline within the next hour as traders reflected on the implication of the decision, which also saw the SNB deepen negative deposit rates. The franc surged as much as 38 percent versus the greenback. India’s rupee jumped in response to an unscheduled interest-rate cut and the Australian dollar strengthened after a report showed the nation’s jobless rate unexpectedly declined in December.

Gain Capital Holdings Inc.’s Forex.com halted trading in the currency after the SNB move, Kathleen Brooks, European research director, said in a telephone interview.

“We’ve seen substantial moves across a range of currencies,” said Jeremy Stretch, head of foreign-exchange strategy at Canadian Imperial Bank of Commerce in London. “Seemingly they’ve decided it’s no longer tenable and they want to try and offset the pressure they’ve been under,” he said, referring to the SNB. “They are just looking to ease policy and moving toward a more negative deposit rate as a possible defense line.”

The franc appreciated 14 percent to 1.0308 per euro at 6:23 a.m. New York time after earlier jumping 41 percent to 85.17 centimes, the strongest since the euro’s 1999 debut. The Swiss currency gained 14 percent to 88.02 centimes per dollar, after touching 74.06 centimes, the strongest since August 2011. Australia’s dollar gained 0.6 percent to 81.95 U.S. cents after advancing to 82.55 cents on Jan. 12, the highest level since Dec. 16.

Surprise Move

The Indian rupee appreciated 0.2 percent to 62.09 per dollar after strengthening as much as 1.3 percent.

The Swiss central bank lowered the interest rate on sight deposit account balances that exceed a given exemption threshold to minus 0.75 percent from minus 0.25 percent, it said in a statement today. It also moved the target range for the three- month Libor to between minus 1.25 percent and minus 0.25 percent, from the current range of between minus 0.75 percent and 0.25 percent.

In an interview with Swiss broadcaster RTS on Jan. 13, SNB Vice President Jean-Pierre Danthine said central bank officials were “convinced that the cap on the franc must remain the pillar of our monetary policy.” The move comes less than a month after the SNB said it would impose a negative deposit rate to supplement its 1.20-per-euro cap. SNB President Thomas Jordan will hold a briefing at 1:15 p.m. in Zurich today.