ZURICH: The Swiss franc tracked the euro lower against the dollar on Wednesday as reports the European Central Bank has rejected a Spanish plan to bail out the country's banks pushed the beleaguered euro to a fresh 23-month low.
The euro and the Swiss reversed course after they had gained some ground late on Tuesday on a new poll in Greece showing increased support for pro-bailout parties.
The franc has traded in lockstep with the euro since the Swiss National Bank (SNB) set a cap of 1.20 per euro last September after safe-haven buying pushed the Swissie to near parity, threatening to tip the country into recession.
"The European Central Bank's rejection of plans to recapitalise Bankia in Spain and a downgrade of Spain's credit ratings, once again brought a dose of reality back to markets," said Credit Agricole forex head Mitul Kotecha in a note.
"Even a firmer tone to equity markets and slightly better risk appetite has failed to provide any support to the euro as Greece passes the baton to Spain as the new epicentre of market attention," Kotecha said.
Despite heavy pressure on the euro, the SNB has not needed to intervene heavily to defend the 1.20 cap, as a comparably muted rise in average sight deposits in the last week showed, said UBS economist Reto Huenerwadel.
"Relative to market expectations any such increase in SNB sight deposits in order to prevent EURCHF from dropping below the 1.20 mark appears moderate," Huenerwadel said.
The franc fell 0.1 percent against the dollar compared to the New York close to trade at 0.9629 francs per dollar by 0623 GMT after setting a new 15-month low early in the session.
The franc was little moved against the euro at 1.2012 francs per euro.
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