ZURICH: The Swiss franc trod water against the dollar and the euro on Wednesday as investors sat on the sidelines ahead of the Swiss National Bank's quarterly monetary policy assessment later in the week.
The SNB is expected to confirm its commitment to maintaining the cap on the franc of 1.20 to the euro when it announces its monetary policy decision at 0830 GMT on Thursday.
After safe-haven buying pushed the currency up by a quarter in just a few months, the central bank set the cap in Sept. 2011 to stave off the threat of deflation and recession.
Moves by Swiss banks Credit Suisse and UBS to start charging other banks for holding the franc and deter rivals from hoarding the safe-haven currency have weakened the unit to around 1.21 over the past week.
UBS economist Reto Huenerwadel said the moves by the Swiss banks and a debate over how the SNB would react to any interest rate cut from the European Central Bank next year have driven the franc down against the euro.
The banks' moves are aimed solely at protecting profit margins in the face of rock-bottom interest rates, but their actions are inadvertently doing a favour to the country's central bank by helping to weaken its strong currency.
The franc was steady against the euro at 1.2124 by 0712 GMT compared to the New York close. Against the dollar, the franc was also little changed at 0.932.
Germany's surprisingly strong ZEW economic sentiment index supported the euro, fanning hopes that Europe's largest economy may avoid recession this winter despite grim news from elsewhere in the region.
The Swiss ZEW index due later on Wednesday will show how investors think the Swiss economy will fare over the next few months.
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