ZURICH: The Swiss franc idled against the euro on Tuesday, with the single currency hovering near a three-month low on the dollar as a plan to tax Cyprus savings accounts fuelled fears about the stability of euro zone financial institutions.
Cyprus's parliament was set to reject a divisive tax on bank deposits in a vote on Tuesday, pushing the island closer to a debt default and banking collapse.
The franc has closely tracked the euro ever since the Swiss National Bank set a 1.20 limit set on the franc in Sept. 2011. The SNB set the cap after investors seeking a safe-haven from the spiralling euro zone crisis bid the currency up to record levels, threatening to tip the Swiss economy into recession.
Meanwhile, currency dealers digested the International Monetary Fund's advice to the Swiss National Bank on Monday to introduce negative interest rates on the excess reserves it holds.
"While the possibility of similar measures has been in the room for some time already, we perceive this to be the SNB's 'ultima ratio' only in an environment of continued upward pressure on the franc," UBS economist Reto Huenerwadel said.
The franc was 0.1 percent weaker against the dollar compared to the New York close, trading at 0.9456 by 0724 GMT.
The franc stood at 1.2255 against the euro.
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