The Swiss franc traded slightly lower against the euro and the dollar on Friday after the European Central Bank endorsed expectations of more interest rate hikes in the euro zone. Stronger than expected Swiss jobless figures supported the franc as falling unemployment added to views that the Swiss National Bank will also continue to tighten credit, avoiding a further increase in the rate differential with the euro zone.
The franc was 0.05 percent lower against the euro at 1.6565 per euro and 0.1 percent weaker against the dollar at 1.2192 per dollar. The ECB kept rates at 4.00 percent on Thursday and ECB President Jean-Claude Trichet said he saw no need to change the expectations of markets, which see a rate rise after the summer.
Swiss unemployment fell to its lowest level in nearly 5 years in June, in another sign that the strong economy provides the SNB with the necessary leeway to hike rates.
"The SNB will continue to raise rates because of the strong economy and the weak franc," said Sarasin's Alessandro Bee. The franc has been under pressure as investors make use of the differential between Switzerland's relatively low short term benchmark interest rate of 2.50 percent and the 4.00 percent in the euro zone to fund carry trades by borrowing the franc.
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