The US dollar, meanwhile, dropped across the board, hurt by sharp losses versus the franc and improved risk appetite, with most commodities higher. Investors sought higher-yielding currencies such as the Australian dollar and Norwegian crown.
The Swiss franc strengthened even after the SNB said it would boost liquidity by expanding sight deposits to 200 billion francs from 120 billion, reiterating it would take additional steps if needed.
In a subsequent briefing, the Swiss government announced a package of measures such as providing 2 billion Swiss francs to support the economy and assisting the export and tourism sectors. Most market participants considered the measures unimpressive and bought more francs.
“Based on the price action, it looked like the market was positioning for stronger action such as an intervention package from the Swiss government and they didn’t get that,” said Greg Anderson, senior currency strategist at CitiFX in New York.
At the end of the day, however, Swiss policy doesn’t matter, he said.
“You’re pitting an economy with less than 8 million people against the euro zone with a population of 338 million. If euro zone investors want to buy the Swiss franc because they don’t feel safe, there’s nothing the Swiss can do about it.”
The euro tumbled more than 2 percent against the franc in volatile trade to hit a low of 1.12248 francs on the EBS trading platform as safe-haven demand for the Swiss currency resumed. It was last at 1.14095 francs, down 0.7 percent.
Earlier, the euro had strengthened past 1.15 francs for the first time this month as talk the Swiss might introduce a lower target level against the single currency left traders wary of betting against such a move. The euro did hit 1.15 francs again in New York reportedly on buying by a big Swiss name.
Spot traders reported abnormally wide spreads being quoted in the franc while in the options market, overnight implied volatility continued to trade at extreme levels of over 50 percent on jitters over the potential for more SNB action.
One-week implied vols were also elevated, trading around 24.1 percent on Wednesday. A week ago, vols were at 18 percent.
“The Swiss franc will very much remain a favored currency because of ongoing concerns about the euro zone debt crisis, and it will be a battle between those who want to buy Swiss francs and the authorities who want to stem its gains,” Societe Generale currency strategist Michael Sneyd said in London.
The dollar was down 0.8 percent at 0.78889 francs.
The greenback weakened broadly amid a volatile risk appetite environment that on Wednesday turned higher.
“It seemed like a risk-on day. I think it’s the idea that the debt crisis in Europe and the imminent urgency of it seems
to have abated given the ECB’s buying of peripheral bonds,” said Brian Dolan, chief currency strategist, at Forex.com in Bedminster, New Jersey.
Earlier in the New York session, the European Central Bank was rumored to have bought Italian bonds, traders said.
“We’re looking at the stabilization of risk sentiment with stocks holding their ground. It doesn’t seem to be the disaster that it looked like a few weeks ago,” Dolan said.
The ICE Futures’ dollar index was down 0.4 percent at 73.754.
The euro was up 0.2 percent at $1.44377 in choppy trading, moving in tandem with the euro/Swiss franc.
A move back below support at its 100-day moving average around $1.43560 and the 55-day moving average at roughly $1.43300 could leave the euro open to a test of last week’s low just above $1.41.
Traders said a large $1.40/1.47 double-no-touch range bet may well serve to keep the euro restricted against the dollar, at least until the structure is said to expire around the middle of next week.
