UPDATE 1-Swiss franc tumbles as SNB intervenes in FX

(Updates with prices, more context, quotes. Adds byline)

By Jamie McGeever and Veronica Brown

LONDON, March 12 (Reuters) - The Swiss franc saw its biggest ever one-day drop against the euro on Thursday after the Swiss National Bank sold francs as part of a drive to help the economy, which also included an interest rate cut and planned bond buying.

The SNB's intervention stunned global foreign exchange markets and pushed both the euro and dollar to their highest levels against the Swiss franc this year, up more than 3 percent on the day.

The SNB last physically intervened in the foreign exchange market in August 1995.

The SNB cut its three-month LIBOR target by 25 basis points to a historic low of 0.25 percent, as expected, but the real surprises were its more unconventional policy steps: buying bonds and foreign currency.

"The SNB (is) the first central bank in the developed world to now incorporate FX intervention as an integral part of monetary policy," said Julien Manceaux, economist at ING.

Traders said the SNB sold francs for euros and dollars almost as soon as headlines from the statement accompanying its rate cut at 1300 GMT started to appear. That equated with buying dollars around 1.1550 francs and euros around 1.4750 francs.

At 1350 GMT the euro was up 2.9 percent on the day at 1.5220 francs EURCHF=, having traded as high as 1.5302 francs, Reuters data showed.

The dollar was up 3.2 percent on the day at 1.1905 francs CHF=, the first time it has appreciated more than 3 percent in one day against the Swissie since mid-1995.

An SNB spokesman confirmed that the central bank had backed up its statement to buy foreign currency with action.

Asked if the central bank was intervening in the currency market, a SNB spokesman said: "We have announced this decision, of course we are implementing it."

The SNB's measures go far beyond what analysts had expected. The SNB said it would increase liquidity substantially by engaging in additional repo operations, buying Swiss franc bonds issued by private sector borrowers and purchasing foreign currency on the foreign exchange market.

"The way this was communicated was intended at maximising its shock value," said Michael Woolfolk, senior currency strategist, Bank of New York-Mellon in New York. "This was the full monty. There were no expectations for this," he said.

For more on SNB's statement see [ID:nLB459488] and for analysts' views see [ID:nL13754863].

(Additional reporting by Steven Johnson in New York; editing by David Stamp)