ZURICH: The Swiss franc was stable against the euro and the dollar in choppy trading on Wednesday as investor hopes for a lasting solution to the euro zone crisis continued to ebb and flow, with thin trading volumes adding to market volatility.
In early trading, the franc had plumbed its lowest levels since January against the greenback after the Federal Reserve held back from further measures to stimulate US growth, pushing risk aversion higher and favouring the dollar.
The euro remained close on year lows against the dollar, which many investors see as the only safe haven in the ongoing crisis after the Japanese and Swiss central banks took steps to cap their soaring currencies.
"As expected, risk aversion returned as the market focused on the implementation risks of the proposed EU fiscal stability pact," said Credit Suisse analysts in a note.
The franc has shadowed the euro closely since Switzerland's central bank imposed a cap of 1.20 francs per euro on September 6 after safe haven buyers almost pushed the franc to parity, hammering the competitiveness of Swiss exporters.
Since then traders have been on alert for any indication the SNB could raise the cap further, and the central bank's quarterly policy assessment on Thursday will be closely watched.
The franc was flat against the dollar compared to the New York close, trading at 0.9458 francs per dollar at 0903 GMT.
The franc was slightly weaker against the euro at 1.2331 francs per euro.
However, some analysts said investors should be wary of how developments in the euro zone could risk unhinging the cap.
"With a permanent policy solution in Europe outside Swiss official control, inflation pressures could ultimately prove too strong, prompting a challenge to SNB CHF selling," said analysts at Credit Agricole in their monthly review.
The euro remained under pressure as discussions aimed at securing a lasting solution to the euro zone debt crisis dragged on.
"The euro is set to continue to remain under pressure, with any rally set to be sold into," said the Credit Agricole analysts.
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