Geneva - The Swiss central bank said on Wednesday it would significantly increase the supply of liquidity as well as narrow its target lending rate to try and stem the rise in the strong Swiss franc.
"Effective immediately, the SNB is aiming for a three-month Libor as close to zero as possible, narrowing the target range for the three-month Libor from 0.00-0.75% to 0.00-0.25%," it said in a statement after the Swiss currency rose to record highs against the US dollar and the euro.
"At the same time, it will very significantly increase the supply of liquidity to the Swiss franc money market over the next few days," the central bank added.
The Swiss franc has risen sharply in recent months to record highs as investors seek out a safe haven for their money amid growing fears over the eurozone debt crisis and a weakening economic outlook.
In early Wednesday trade, the franc was changing hands at 1.0958 per euro, and 0.7708 against the dollar.
For the central bank, the franc is "massively overvalued at present" and threatening the Swiss economy.
With the global economic outlook also weak, "the outlook for the Swiss economy has deteriorated substantially," it said.
"The SNB is keeping a close watch on developments on the foreign exchange market and will take further measures against the strength of the Swiss franc if necessary," it added.