The Swiss franc was up as much as 37 per cent against the euro before later paring gains. Swiss shares shed some 10 per cent after investors rushed into safe-haven assets such as gold and German bonds.
Its currency "ceiling" of SFr 1.2 per euro, introduced during the Eurozone crisis to stem value increases, was scrapped on the grounds it was no longer justified.
"While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate," it said. "The economy was able to take advantage of this phase to adjust to the new situation."
"Recently, divergences between the monetary policies of the major currency areas have increased significantly - a trend that is likely to become even more pronounced."
"The euro has depreciated against the US dollar and this, in turn, has caused the Swiss franc to weaken against the US dollar."
"In these circumstances, the Swiss National Bank concluded that enforcing and maintaining the minimum exchange rate for the Swiss franc against the euro is no longer justified."
The central bank also took interest rates further into negative territory, down to -0.75 per cent from -0.25 per cent. In December it had once again surprised investors with the plunge into negative rates.
"The The Swiss National Bank is lowering interest rates significantly to ensure that the discontinuation of the minimum rate does not lead to an inappropriate tightening of monetary conditions," the central bank said.
"The Swiss National Bank will continue to take account of the exchange rate situation in formulating its monetary policy in future. If necessary, it will therefore remain active in the foreign exchange market to influence monetary conditions."