The Swiss franc fell against the euro on Friday as investors turned their focus to strong euro zone economic fundamentals from dashed hopes of a possible European Central Bank rate hike in coming months. The euro was on the defensive on Thursday after ECB President Jean-Claude Trichet poured cold water on expectations for a near-term rate hike, wrong footing bulls who had expected more tough talk on inflation.
"All the lead indicators are pointing to a very robust economy in euro land and PMI services have risen not just in the core but also on the periphery of euro land and this has boosted confidence in the euro," Sarasin analyst Ursina Kubli said. The franc was down 0.1 percent against the euro compared to the New York close, trading at 1.2905 per euro.
The franc 0.1 percent lower against the dollar at 0.9465 per dollar. The Swissie, which rose more than 15 percent against the euro last year to hit a record high in December, lost ground against the euro lately as the spread of short money market rates widened with respect to the single currency, increasing the relative attractiveness of the euro.
But Kubli sees the franc rising to 1.25 to the euro in the first half because Portugal could have difficulty refinancing debt at current interest rates. The euro should then recover to 1.40 francs towards the end of the year as euro fears recede.