Switzerland’s central bank stepped in to stop investors driving up the franc on Tuesday, sending the euro up nearly 9 percent and stifling a tentative European stock recovery from sharp losses a day earlier.
Core German debt yields, however, stayed near historic lows, well below 2 percent, signaling a frenzied search for safety was continue.
European banking stocks, battered by fears of exposure to both euro zone peripheral debt and a U.S. lawsuit over mortgage-backed securities, added to Monday’s losses.
The Swiss National Bank whipped up the markets, saying it was setting a minimum exchange rate target of 1.20 francs to the euro that it will enforce by buying foreign currency in unlimited quantities.
The franc has soared against the euro and the dollar in recent months as investors have bought the currency as a safe place for their money given the U.S. and euro zone debt crises.