ZURICH: The Swiss franc climbed up alongside the euro against the greenback on Tuesday, recovering from the previous session's three-week low, yet gains were limited owing to concerns about Spain's budget problems.
Market participants are waiting to see if Spain asks for an international bailout, triggering the European Central Bank's bond buying programme. Comments by EU Commissioner Olli Rehn that the money Spain plans to take for its ailing banks should start flowing in November provided traders some grounds for optimism.
"Risk-sensitive currencies strengthened," analysts at Credit Suisse said. "Mr. Rehn confirmed that Spain has not submitted any request for an additional bailout but that the EU Commission would stand ready to act."
Since the Swiss National Bank set a cap of 1.20 per euro a year ago, the franc has largely traded in tandem with the euro against the dollar. Signs of market tensions in the euro zone easing somewhat caused the franc to weaken against the euro last month, though that trajectory has now reversed.
The Swiss economy started off the year surprisingly well, shrugging off the ill-effects of the strong franc. But the economy contracted in the second quarter and manufacturing data sank to its lowest since June 2009, a sign economists say may mean more tough times ahead.
Yet with sings mounting Swiss economy momentum is waning and euro zone tensions lessening at the same time, the pressure on the SNB's cap on the franc seems to be easing.
The amount of cash commercial banks hold with the central bank dipped slightly for the second weak running last week to 291.2 billion francs, data on Monday showed.
"The data highlight another week of relative quiet in terms of FX interventions for the SNB taking further pressure of the cross," UBS economist Reto Huenerwadel said.
The franc rose 0.2 percent against the dollar to trade at 0.9365 by 0549 GMT compared to the New York close.
The franc was flat against the euro at 1.2096.
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