ZURICH: The Swiss franc dipped against the euro on Tuesday with investors cautiously repositioning ahead of a ruling by Germany's Constitutional Court on the euro zone's bailout funds and a US Federal Reserve meeting.
An important ruling by Germany's Constitutional Court over whether to allow an EU bailout fund and budget pact has stalled a rally in the euro, which hit an eight-month high against the franc last Friday, as investors cheered a European Central Bank bond-buying plan.
Markets are also awaiting to see whether the US Federal Reserve will opt for more monetary easing to help prop up the fragile US recovery, which could further support the euro.
The franc has traded largely in tandem with the single currency since the Swiss National Bank capped it a year ago to stave off deflation and the threat of recession, after safe-haven buying nearly pushed the currency pair to parity.
The focus is now on the Swiss National Bank's monetary policy review on Thursday, with expectations ebbing that the central bank will raise the floor, despite the franc's recent weakening.
"Gradually, everyone who has bet on the SNB raising the floor, should start to doubt. There has not been a single signal from the central bank for such a step," Commerzbank analysts said in a note.
UBS economist Reto Huenerwadel also expects little change to the SNB's monetary policy.
"With SNB directorate members reiterating the importance of the lower boundary, inflation remaining a non-issue, a broadly speaking well behaved SNB balance and Central Banks becoming more expansive again globally, we expect the lower boundary in the euro-franc to prevail for some time."
The franc rose 0.2 percent to a three-month high against the dollar compared to the New York Close by 0709 GMT to trade at 0.9437.
Against the euro, the franc dipped 0.1 percent to trade at 1.2084.
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