ZURICH: The Swiss franc traded not far off the previous session's 19-month low against the dollar, on concerns about the euro zone's ability to tackle its debt crisis after a meeting of the bloc's finance ministers yielded no positive surprises.
Euro zone ministers agreed to grant Spain an extra year -- until 2014 -- to reach its deficit reduction targets. But they made no apparent progress on activating the bloc's rescue funds to bring down the spiralling borrowing costs for Spain and Italy.
Since the Swiss National Bank set an upper limit of 1.20 per euro on the safe-haven franc on Sept. 6 last year, it has been trading largely in lock-step with the common currency.
As the euro zone crisis festers, pressure on the SNB's cap has risen, forcing the central bank to inject tens of billions of francs a month to make it stick. Sight deposits - the cash commercial banks hold with the SNB - has climbed markedly in the past two months, a sign of rising anxiety among investors but also a possible early indication of the SNB's operations to defend the cap.
Yet in the week to July 6, the sight deposits of domestic banks rose only by some 7 billion francs, compared with a weekly jump of nearly 18 billion francs in mid June.
"As such, we find it safe to say that the SNB has turned towards more normal in terms of FX interventions in early July," UBS economist Reto Huenerwadel said.
The franc was down 0.2 percent against the dollar to trade at 0.9772 by 0539 GMT compared to the New York close.
The franc was flat against the euro at 1.2009.
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