ZURICH: The Swiss franc weakened against the dollar on Tuesday, giving up some of Monday's gains as it tracked the euro lower after Moody's cut France's sovereign credit rating, though hopes of approval for a Greek aid package capped losses.
The franc has been shadowing the euro closely since the Swiss National Bank imposed a 1.20 per euro cap more than a year ago after a strong run up in the Swiss currency threatened to tip the export-oriented economy into recession.
Euro zone data due later this week are expected to be weak, which could put renewed pressure on the euro, analysts said.
"Data releases in the Eurozone will do little to help the euro given expectations of weak purchasing managers' indices and a yet another drop in the German IFO business confidence survey over coming days," said Credit Agricole forex strategist Mitul Kotecha in a note.
"Any boost to euro sentiment will be short lived as discussions about Greece's sustainability and disagreements among its creditors hog the limelight," Kotecha said.
Data on Monday showed sight deposits held in Swiss banks rose for the first time in a month, although by a very small amount, indicating that the SNB is not being forced to fight hard to defend the franc.
Though weakened by the French downgrade, traders said the euro was supported by investors unwinding short positions ahead of a meeting of European finance ministers later on Tuesday that could give the go-ahead for a Greek aid package.
In the US, risk appetite was firmer overnight as President Obama and US Congressional leaders seemed to make some progress towards dealing with the US "fiscal cliff", which would trigger automatic budget cuts.
The franc fell 0.1 percent against the dollar compared to the New York close, trading at 0.9418 francs per dollar at 0745 GMT.
The franc held steady against the euro at 1.2040 francs per euro.
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