LONDON: The Swiss franc fell to a 10-day low against a broadly flat euro on Thursday, after the head of the Swiss National Bank said it was "considerably over-valued" and that the SNB would continue to intervene in currency markets.
As talks between debt-laden Greece and its creditors ground on with no clear sign that a deal was on the table, the euro bounced around a little against the dollar in choppy trade, but stayed within its recent ranges. By 1150 GMT it was flat at $1.1210.
The biggest mover among major currencies was the franc, which shed as much as 0.8 percent against the euro to 1.05465 , after SNB Chairman Thomas Jordan's warning shot. Against the dollar, it traded at 0.9416 francs, its weakest since June 8.
A failure by Greek officials to reach an aid-for-reforms deal with the country's creditors would be likely to spark massive safe-haven flows into the Swiss currency. "The Swiss are always going to try and talk their currency down," said one currency trader at a major international bank in London.
"They tried to keep it weak for all those years and they obviously couldn't stem the tide. But even if it's not a specific policy with a specific rate, they will jawbone." The euro has traded in the $1.09-$1.14 area for several weeks, with strategists arguing over the extent to which it has been affected by talks on Greece.
Some analysts reckon that with the market betting some sort of a Greek deal will be reached, the euro's direction against the dollar can once again be dictated by fundamental factors.
With ultra-loose monetary policy in the euro zone and US interest rates seen moving higher, that means a weaker euro. Neil Mellor, a currency strategist at Bank of New York Mellon in London, said the euro would fall on good news from Greece, as investors used it for carry trades -- borrowing it and then selling it to buy higher-yielding currencies.
"What has been fairly clear is that every time there's a chance of a deal the euro plummets, and every time there's disappointment coming along, it reverses course," he said. "The only interpretation you can place on that is that the market is looking to use the euro as a funding currency in a carry trade.
The prerequisite of a carry trade is relative stability, so if a Greek deal is on, you sell the euro."
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