ZURICH: The Swiss franc slipped a notch versus the dollar on Wednesday with investors nervously waiting to see which measures European governments and central banks will take to combat the region's crippling debts.
The franc has largely been moving in tandem with the euro against the dollar for the past year, due to the cap of 1.20 per euro set by the Swiss National Bank on the safe-haven franc last Sept. 6 to ward off deflation and a recession.
The euro was down slightly against the greenback on Wednesday after hitting a seven-week high driven by hope European policymakers will take decisive action to stamp out the still simmering eurozone crisis.
Hope for action from the European Central Bank (ECB) has eased tensions and resulted in "Spanish and Italian bond yields coming down quite a bit," Bank Sarasin economist Alessandro Bee said.
Consequently, the franc is likely to remain nailed to the level of 1.20 per euro for the coming weeks without the SNB intervening massively, he said.
"Everyone is now looking for action from (ECB president Mario) Draghi," Bee said. However, should hopes of a quick fix for the eurozone be dashed, nervousness will return and the SNB will have to spring back into action, he said.
Hopes that the ECB would start buying bonds of struggling euro zone members in September hav e underpinned the euro since late last month.
However, the European Central Bank on Monday rejected a report by German magazine Der Spiegel, claiming it was considering setting yield thresholds for any moves to buy bonds. Germany's Bundesbank also stepped up its resistance on Monday to a ECB plan to buy billions of euros worth of Spanish and Italian government bonds.
The European Central Bank will meet next on Sept. 6 with a number of media reports suggesting action may be taken to limit Spanish and Italian bond yields.
Greece was also in the spotlight again as Prime Minister Antonis Samaras is meeting German Chancellor Angela Merkel, French President Francois Hollande and Eurogroup chief Jean-Claude Juncker in the coming days.
The franc dipped against the dollar to trade at 0.9636 by 0700 GMT compared to the New York close.
The franc was flat against the euro at 1.2010.
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