Soaring Swiss Franc means it now costs $8.30 for American tourist to buy a cup of coffee in Zurich



Diners would pay 128 per cent more for a Big Mac in Switzerland than the U.S.

Swiss Franc reached all-time high of 70 centimes to the dollar earlier this month

Manufacturers including Nestle face having to make job cuts as export market dries up

Global markets fall as Swiss National Bank decides not to 'peg' franc to the euro

A U.S. tourist would face paying $8.30 for a cup of coffee in Zurich after the Swiss franc soared to a new record high this month.

Switzerland was considering imposing an exchange rate target to prevent its goods becoming prohibitively expensive as the franc reached $1.28 in today's exchange rate.

If it is unable to rein in its runaway currency, Swiss manufacturing could see major job losses as it faces increasing pressure to cut costs.

Expensive holiday: A U.S. tourist would have to fork out $8.30 for a cup of coffee in Zurich as the Swiss franc continues to soar in value (file picture)

The franc, which appreciated to an all-time high of 70.71 centimes against the dollar earlier this month, has traditionally been seen as a haven during economic hardships and is heavily overpriced against other currencies.

Diners at a Swiss branch of McDonalds would pay 128 per cent more for a Big Mac than they would in the U.S., according to a Bloomberg index.

Billionaire entrepreneur Christoph Blocher told Bloomberg: 'The franc is catastrophically overvalued.

'It's almost like economic warfare - to wage a war, you must use all measures at your disposal, and you must win.'

Pressures: Swiss exports, which account for 50 per cent of GDP, could be badly hit if the franc is not devalued

Economiesuisse, the country's largest business lobby group, added: 'If the franc can't be weakened, many machinery makers will have to take drastic decisions this fall.'

Zurich is already the world's second-most expensive city, behind Oslo in Norway, a study by UBS AG revealed.

The Swiss government held talks this week over a possible exchange rate target - linking the franc to the value of another currency such as the euro - in a bid to devalue it.

'Taboo': The Swiss National Bank earlier decided not to 'peg' the value of the franc to the euro - a move likely to cause more unrest in the markets

The Swiss National Bank (SNB) lost $21 billion last year in a failed attempt to hold back the franc.

But the SNB decided to inject more of the Swiss currency into the money markets in another attempt to cause it to depreciate.

In its latest batch of measures - the third this month - the central bank said it would conduct foreign exchange swap transaction to ease the value of the franc and 'will, if necessary, take further measures'.

It last implemented an exchange-rate target in 1978, when it attached itself to Germany's deutsche mark.



Seven government members are expected to meet later today to discuss the strength of the franc.

Exports make up around half of Swiss GDP, raising the very real issue that a continued overvaluing of the franc will effect the economy.



After the SNB cut interest rates on August 3, the Swiss franc initially lost around 3.5 per cent against the euro.



But over the last two months it has strengthened 7.2 per cent as the euro zone battles to contain a mounting debt crisis.



Alexander Krueger, chief economist at Bankhaus Lampe KG in Dusseldorf, told Bloomberg: 'As long as people are concerned, the franc will continue to appreciate, probably beyond parity.'

Concerns: This chart shows the soaring value of the Swiss franc over the last 18 months. Below, inflation in Europe has also soared as nation's battle the sovereign debt crisis

CPI index

By this afternoon, the dollar was trading 1.3 per cent lower at 0.7859 francs, while the euro was down 1.2 per cent at 1.13.

Over recent days, the Swiss franc has fallen over speculation it could be 'pegged' with the euro.



But the decision not to implement it could see it rise again, after last week almost reaching parity with the euro for the first time since it was introduced in 1999.



It comes as global stock markets largely fell as hopes of strong action in the euro zone against the escalating sovereign debt crisis faded.



The FTSE 100 closed at 5,331.60, a loss of 0.49 per cent. And there was a muted start to trading in New York, with the Dow Jones little changed at 11,411.84.

