If the Federal Reserve was attempting to stabilise the markets with its promise to freeze interest rates for two years, the currency markets were not listening.

Within minutes of the US central bank’s announcement the Swiss franc had soared to a record high of SFr0.7085 against the dollar. Its move on the day – at one point more than 6 per cent – was the largest in three decades. In recent history the Swiss franc has seen sharper moves against the dollar only in the currency market convulsions of the late 1970s when the world was fighting stagflation.

Tuesday’s reaction recalled the so-called “currency wars” that followed the Fed’s second quantitative easing programme last year, in which moves by central banks to prop up their domestic economies created fresh problems for other countries.

The franc was the most dramatic beneficiary of the Fed’s move but other currencies also appreciated sharply. The yen rallied 1.4 per cent to Y76.68 per dollar while gold, another haven, was flirting with record highs of almost $1,780 a troy ounce.

Analysts predicted that the rollercoaster currency moves would heap pressure on the central banks of Switzerland and Japan to intervene to curb appreciation of their currencies.

The Swiss National Bank last week called the franc “massively overvalued”, cutting interest rates and flooding Swiss money markets with liquidity. The Bank of Japan intervened earlier this month when the yen was only slightly higher than levels reached on Tuesday.

Currency traders said the moves by the franc and the yen, traditional haven currencies in times of economic turmoil, underscored the fearful nature of investors after a fortnight of swings in global markets.

“It’s extraordinary,” said Alan Ruskin, strategist at Deutsche Bank, of the move in the franc. “It speaks to a market that just doesn’t want to go the other way.”

While the Fed’s promise to keep rates on hold weakened the dollar against a broad basket of currencies, traders said the Swiss franc was benefiting from the expectation of further economic turbulence.

“The strength of the Swiss franc is a symptom of a broader problem, and a sign of investors looking for less risk,” said Win Thin, at Brown Brothers Harriman in New York.

But strategists doubted that either Japan or Switzerland would succeed in stemming their currencies’ appreciation, given the weight of investor money pushing in the opposite direction.

Despite the sharp currency swings, few envisage co-ordinated intervention from the world’s central banks – as was hinted at by a promise from the Group of Seven rich countries at the weekend to “take all necessary measures” to support financial stability.

Additional reporting by Aline van Duyn in New York

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