ZURICH: The Swiss franc weakened alongside the euro against the dollar on Tuesday and looked set to re-test the previous day's near two-month low, with concerns about Greece weighing on the common currency.
The euro languished near a two-month low versus the dollar, ahead of a Greek parliamentary vote on Wednesday on austerity steps needed for Athens to secure international aid.
Owing to the cap of 1.20 per euro set by the Swiss National Bank a year ago, the franc frequently trades in tandem with the common currency against the dollar.
"A flight for safety yesterday saw the dollar make significant gains against the other major currency pairs and more of the same is expected today," said Craig Erlam, market analyst at Alpari.
Earlier this year, the SNB resorted to huge interventions to make its cap on the franc stick, resulting in a ballooning of its foreign exchange reserves to around 73 percent of annual output.
Yet an easing of concerns among market players about the euro zone has taken some of the safe-haven pressure off the franc, allowing it to weaken closer to 1.21 per euro.
The amount of cash commercial banks hold with the Swiss National Bank -- considered a gauge of its interventions - slipped to a two-month low last week, data on Monday showed.
"Another quiet week for the SNB," UBS economist Reto Huenerwadel said.
The franc was down 0.1 percent against the dollar to trade at 0.9437 by 0711 GMT compared to the New York close.
The franc was flat against the euro at 1.2070.
Data published on Tuesday showed consumer confidence stabilised at a weak -17 points in the fourth-quarter, unchanged from the third.
Private consumption is a key pillar of the Alpine economy, and if it remains robust it will help Switzerland weather the slowdown as the euro zone, its biggest trading partner, suffers tough times.
The Swiss economy shrank slightly in the second quarter, and the government expects growth of about 1 percent for the year.
"The weak euro zone economy is increasingly being felt in Switzerland," economists at VP Bank said. "In the third quarter private consumption should have been a below-average contributor to growth."
Comments
Comments are closed for this article.