ZURICH: The Swiss franc hit its lowest level this year against the euro in early trading as traders bought euros and sold francs on expectations the European Central Bank could raise interest rates on Thursday.
"Resistance levels have been broken, and the carry trade is coming into play again with investors borrowing francs and buying euros or dollars," one trader said.
The franc fell 0.4 percent against the euro compared to the New York close, trading at 1.3207 francs per euro having earlier hit 1.3236, its lowest mark since late November.
Swiss National Bank board member Jean-Pierre Danthine also on Wednesday appeared to steer markets away from a near-term interest rate rise in a newspaper interview.
"For the whole economy, the monetary conditions are appropriate at the moment," Germany's Boersen-Zeitung quoted Danthine as saying in an interview.
But the SNB was also facing a dilemma and the central bank would hike interest rates if it were to look solely at the country's real estate market or the domestic economy, Danthine was quoted as saying.
Data due at 0715 GMT are expected to show Swiss consumer prices rose 0.6 percent year-on-year in March according to economists polled by Reuters, showing inflation continues to be contained at a low mark by international standards.
The strong Swiss franc has shielded the country from rising prices for imported oil and food products, supporting views the Swiss National Bank will keep interest rates unchanged for now.
"The currency remains at inflation suppressing levels. Unfortunately however, with the exception of less price sensitive luxury goods, levels are also constraining exports." said Credit Agricole analysts in a note.
"As such we see little scope for SNB tightening before end-Q3, and only then if the ECB delivers an expected 0.5 percent of tightening. As such, in the current risk-on environment we see continued mild Swiss franc weakness and forecast 1.34 (francs to the euro) by end-June," they said.
The franc was 0.1 lower percent against the dollar at 0.9259 francs per dollar.
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