Spain concerns push Swiss franc to 3-week low vs dollar

ZURICH: The Swiss franc tracked the euro to its lowest in nearly three weeks against the dollar on Monday due to unease among investors about Spain's strained state finances and its prospects for an international bailout.

An independent audit released on Friday showed Spain's banking sector would need 59.3 billion euros in additional funds to cope with an economic downturn but Spain said it would ask for only 40 billion euros in European aid for its banks.

The safe-haven franc has spent much of the last year trading in tandem with the euro after the Swiss National Bank set a cap of 1.20 per euro on it to ward off deflation and a recession.

Thanks to signs that market stress due to the sovereign debt crisis was easing, the franc had been on a weakening course against the euro since Sept. 5. But concerns about Spain have caused that trajectory to reverse.

"For the trading start we expect a slight easing of prices," analysts at the St. Gallen-based bank acrevis AG said in a note.

Although growth momentum held up surprisingly well despite the strong currency, the economy contracted in the second quarter and the central bank cut its growth forecast to 1 percent for 2012.

Swiss exporters need the central bank to defend the cap it imposed on the strong Swiss franc a year ago, even if they have become more efficient, Economy Minister Johann Schneider-Ammann was quoted as saying at the weekend.

Due later on Monday will be retail sales data for August at 0715 GMT and the manufacturing PMI index at 0730 GMT.

"Swiss PMI and retail sales to come which should attract some independent interest," said Informa Global Markets analyst Tony Nyman.

"However, Euro and broader market sentiment will likely be main driver and at the moment it is relatively negative," Nyman said, adding that the franc might well rise against the euro and the dollar in the near term.

At 0700 GMT, the Swiss National Bank will release data on sight deposits, the amount of cash commercial banks have placed with it. That figure is seen as a gauge of risk aversion and also of the scope of the central bank's interventions.

The franc touched its lowest since Sept. 11 in intra-day trade, slipping 0.2 percent against the dollar to trade at 0.9411 by 0636 GMT compared to Friday's New York close.

The franc was flat against the euro at 1.2084.