Switzerlands franc weakened the most in 18 months versus the euro after the nations central bank introduced negative interest rates to defend the currencys cap.

The shared currency fell for a second day against the dollar as the Swiss National Bank decision boosted speculation the European Central Bank will expand stimulus measures next year. A gauge of the dollar reached a five-year high amid signals the Federal Reserves pledge to be œpatient on interest rates means an increase next year. Colombias peso gained for a third day to lead emerging-market peers higher. The pound gained as volatility rose to a 15-month high.

Switzerlands move was a œtelltale sign that the SNB is cautious because of the ECB, said David Song, a New York-based currency analyst at FXCM Inc. œThe SNB is going to follow along with the ECB in terms of the easing cycle.

The franc depreciated 0.2 percent to 1.20388 per euro as of 3:56 p.m. New York time after dropping as much as 0.7 percent to 1.20974, the weakest level since Oct. 10. The intraday decline was the most since May 2013.

The dollar appreciated 0.2 percent to 118.83 yen after surging 1.9 percent yesterday, the biggest advance since Oct. 31. The U.S. currency appreciated 0.5 percent to $1.2284 per euro and touched $1.2266, the strongest since Dec. 8. The yen strengthened 0.3 percent to 145.98 per euro.

Source : Bloomberg