ZURICH: The Swiss franc was weaker against the dollar on Wednesday, trading in tandem with the euro which hovered close to a four-month low against the greenback as concerns over the Cyprus bailout continued to weigh on sentiment.
Overall risk sentiment improved after US home prices posted their biggest year-on-year gain in six and a half years in January, lifting Asian equities markets with European markets also pointing higher at the open of trading.
The franc has tended to trade in tandem with the euro since the Swiss National Bank imposed a 1.20 per euro cap in September 2011 to prevent deflation and a recession, a policy reiterated by SNB vice-chairman Jean-Pierre Danthine on Monday.
The common currency is still suffering from worries that bank depositors and bond holders may be forced to foot the bill in future euro zone rescue deals, with the Cyprus bailout used as a precedent.
Those fears were ignited on Monday when Jeroen Dijsselbloem, head of the Eurogroup of finance ministers, said the rescue plan for Cyprus would serve as a model for future euro-zone banking crises on Monday. He later appeared to backtrack, saying Cyprus was a unique case, but the damage was done.
"The latest news out of Cyprus and the eurozone did not lay the ground for a material rally in EURCHF," said UBS economist Reto Huenerwadel in a note.
"Taking into consideration that the respective woes did not result in substantial safe haven flows in the first place, similar price action hardly comes as a major surprise."
The franc softened 0.2 percent against the dollar compared to the New York close, trading at 0.9504 francs per dollar at 0752 GMT.
The franc was little changed atainst the euro at 1.2191 per euro.
Single currency traders are likely to focus on an Italian auction of medium and long term debt later in the day to gauge how euro zone sentiment is reacting to ongoing developments in Cyprus and elsewhere.
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