ZURICH: The Swiss franc tracked the euro lower against the dollar on Monday as investors turned more sober from initial euphoria following an European Union agreement to let the bloc's rescue fund to directly inject aid into stricken banks.
Signs that activity in China's manufacturing sector is stalling also revived worries about the health of the global economy, denting the rally triggered by bold new measures to fight the euro zone debt crisis.
The franc fell 0.3 percent against the dollar compared to the New York close to trade at 0.9516 by 0526 GMT. Against the euro, the franc was little changed at 1.2012.
"I think people have been a bit more realistic over the weekend," said Sarasin economist Alessandro Bee. "The measures by the EU are a step in the right direction, but it's now about looking at the detail."
The unexpectedly positive outcome from the two-day summit triggered a rally in Spanish and Italian bonds on Friday and gave the euro it's biggest one day percentage gain since October. The franc also fell to 1.20319 on trading platform EBS, its highest level since May 25.
The safe-haven franc has been trading largely in tandem with the single currency since the Swiss National Bank set a cap of 1.20 francs to the euro last September, after investors anxious about the euro zone crisis almost pushed the unit to parity with the common currency.
In a weekend interview, SNB Chairman Thomas Jordan reiterated the central bank's determination to defend the 1.20 level and said the cap remained vital to stave off deflationary pressures.
"We are enforcing the mininum exchange rate with determination, because this is the correct monetary policy," Jordan told the Sonntagsblick newspaper.
He also signalled little unease about rising foreign exchange reserves. Data due this week will show whether the SNB had to maintain large interventions in June, after foreign reserves jumped sharply in May.
Manufacturing activity data due at 0730 GMT on Monday will also give clues as to how much woes in the neighbouring euro zone - Switzerland's biggest trading partner - are hitting Swiss industry.
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