By Josie Cox 

The Swiss franc remained pinned at sky-high levels on Monday, hovering around one-to-one against the euro after last week's shock decision by the Swiss National Bank to allow its currency to climb.

By midmorning, the franc's gains against the euro were at close to 20% since last week. After the bank's announcement last Thursday, the euro lost about 30% in value against the franc--the biggest single-day move in a developed market traders could recall.

"Around parity the Swiss franc appears more overvalued versus the euro than at any other time in the last 30 years, and the strength of the Swiss franc is likely to put significant strain on the Swiss economy," Beat Siegenthaler, a currency strategist at UBS said--adding that he nonetheless assumes that the exchange rate will "fluctuate around parity for the coming months."

Swiss equities regained some stability on Monday, with the main Swiss SMI up 1.8% even though various banks and brokerages took action by slashing recommendations and price targets for various names.

Several took aim at Swatch Group Ltd, which depends heavily on international sales and has a high cost base denominated in francs.

Kepler Cheuvreux trimmed the name to "hold" from "buy" mirroring a share-price target reduction by 125 francs to 450 francs from Renaissance Capital.

"The pressure on foreign revenue and a fairly inflexible cost base are likely to exert pressure on the operating margin," Renaissance analysts wrote in a note.

Swatch shares were up a little more than 3% on Monday at around 366 francs apiece, but remain more than 17% lower than where they were before the SNB announcement.

Having last week been among the biggest losers, shares in Swiss banks Julius Baer Gruppe AG and UBS Group AG were also among the biggest gainers on the pan-European all-sector index on Monday, as were shares in Zurich Insurance Group AG, Swiss Re AG, Nestlé SA and Novartis AG.

Despite some relief, though, most are still nursing double-digit share price losses since last week.

The head of the Swiss finance department Eveline Widmer-Schlumpf told local press over the weekend that the country "can cope" with the decision by the SNB to let the euro fall below its previous limit of 1.20 francs, but many banks see it remaining dramatically below that level for some time to come.

Credit Suisse economists updated their forecasts and said that they--similar to UBS--now see the franc at euro parity for at least 12 months.

Sebastien Galy, a currency strategist at Société Générale said that he expected the euro to fall as low as 0.95 francs ahead of this week's European Central Bank meeting. The finance ministry's hope for 1.10 francs looks "forlorn for a while", he added.

Expectations that the ECB will announce plans later this week to aggressively ramp up its asset-purchase program continued to shape markets beyond the Swiss franc.

Barclays economists wrote that expectations of the ECB embarking on sovereign quantitative easing, or QE, were now so high that "without decisive actions, the ECB risks failing on its mandate to deliver on the inflation target and financial stability."

"Deflation and market stress, in turn, would deteriorate fiscal dynamics in the euro area and possibly precipitate default or breakup scenarios," they added.

Yields on sovereign bonds issued by countries including Italy, Spain and Portugal slumped to fresh all-time lows. The euro hovered around $1.1570, taking its losses against the dollar so far in 2015 to almost 4.5%.

"Given what we know about the impact of QE programs on currencies it seems reasonable to suppose that the start of this week will see the euro come under significant pressure against a wide range of currencies, " Simon Derrick, chief market strategist at BNY Mellon, said.

The Stoxx Europe 600 and London's FTSE 100 were broadly steady on the day, near a seven-year high, while Germany's DAX added 0.3% and France's CAC declined 0.2%.

In Asia, however, the Chinese stock market suffered its worst selloff in six-years after national regulators disciplined three major brokers for violating rules on margin lending, that helped fuel China's historic stock-market rally with shares up 53% last year.

Brent crude slumped 0.9% to around $49.69 a barrel while gold edged 0.1% lower to $1,275.70 a troy ounce.

Write to Josie Cox at josie.cox@wsj.com

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