The Swiss National Bank lobbed a bombshell into the global currency markets as it gave up defending the Swiss franc against investors desperate for a safe haven against the eurozone debt crisis.
It ditched its three-year-old cap of Swfr1.20 against the euro, imposed to stave off the invasion of cash-seeking protection from turbulent markets.
Within seconds, the "Swissie" soared nearly 30 per cent against the single currency with one investor describing the move as "like detonating a stick of dynamite in a dam".
The pound also plunged, along with all other major currencies.
Steve Woodcock, head of trading at TradeNext, said: "It’s the biggest move I’ve seen in a 30-year career as a trader."
Some analysts speculated that the sudden U-turn in Switzerland’s previous policy meant the SNB had got wind of an even bigger blast of quantitative easing money printing from the European Central Bank than was expected next week.
Only on Monday, the SNB’s vice chairman, Jean-Pierre Danthine, said the cap would remain the cornerstone of Swiss monetary policy.
But the growing crisis in the eurozone meant the flood of cash kept on coming, making it evermore difficult to sustain the cap.
Last month, the SNB was forced to take further measures to defend itself by imposing negative interest rates, effectively meaning investors had to pay to lodge cash in the country.
In an effort to soften the impact of removing the currency cap today, the SNB slashed interest rates even further, by half a percentage point to minus 0.75 per cent.
The SNB said that linking the Swiss franc to the euro meant the currency had fallen dangerously far against the dollar.
"In these circumstances the SNB concluded that enforcing and maintaining the minimum exchange rate for the Swiss franc against the euro is no longer justified," it explained.
Simon Smith, chief economist at currency dealer FxPro, said: "The Swiss central bank has decided this is a battle it can’t win given the ECB is likely to do QE next week or at least in March."
He added that “pressure had been building” on the currency cap due to the swissie’s traditional status as a safe haven.
"But at this point in time, the SNB has broken a dam wall and the waters have flooded out."
Foreign exchange expert Gain Capital’s research director, Kathleen Brooks, added: "If the SNB is so spooked it is disbanding with a policy that it has held dear since 2011, then the rest of the market may want to reconsider their expectations for next week’s ECB meeting."