Swiss franc lower vs euro, dollor as traders eye SNB

ZURICH: The Swiss franc fell more than half a percent against both the euro and the dollar on Wednesday after spiking lower in early trading on talk of stop loss selling and as rumours abounded the Swiss National Bank could raise its target rate for the franc.

While the SNB has declined to comment on the rumours, investors said they were positioning themselves to avoid being caught on the wrong side of the euro-franc trade should the SNB raise its franc-euro floor.

Many traders had to scramble to close out positions when the SNB shocked markets by setting an exchange rate cap on the soaring franc earlier this month, a move that immediately wiped 8 percent from the value of the Alpine currency.

The franc fell 0.7 percent against the dollar compared to the New York close to trade at 0.8931 francs per euro by 0655 GMT.

The franc was 0.7 percent lower against the euro at 1.2241 francs per euro.

"The rumours that the SNB could shift the floor from 1.20 to 1.25 are persistent. The initial move was very successful as the SNB has high credibility in financial markets," said Sarasin analyst Ursina Kubli.

"However, they may not want to risk this success by lifting the rate again so soon. Rather, if the downside risk to the economy increases, they may consider lifting it farther in the future."

On Tuesday, the Swiss government cut its economic growth forecasts for 2011 and 2012, citing the strength of the Swiss franc and a slowdown in global momentum as the prevailing factors.

Copyright Reuters, 2011