ZURICH: The Swiss franc paused its rebound against the dollar on Tuesday, taking its cue from the euro, as investors held their breath ahead of a European Union meeting in Brussels this week.
Uncertainty about Greece's future in the euro zone has unnerved investors, putting the single currency under pressure, although the prospect that Europe can agree new action to tackle the debt crisis has lifted the euro off four-month lows.
"You have the impression that calm before the storm is reigning. Calm before the storm which will probably break loose at tomorrow's informal EU summit," Commerzbank analysts said in a note.
France's new President Francois Hollande is expected to push for a joint euro zone bond at the EU meeting in Brussels, a measure backed by Italy, Spain and the European Commission.
The franc has largely traded in tandem with the euro since the Swiss National Bank set a cap of 1.20 to the euro on Sept. 6 to deter investors anxious about turmoil in the euro zone from using the currency as a safe haven.
An escalation of the euro zone's debt crisis has kept the franc more or less pinned to the 1.20 mark in recent weeks.
Data released on Monday showing Swiss consumer confidence improved further in the second-quarter helped underscore Switzerland's relative resilience, while other European countries grapple with austerity measures.
"Moving largely in tandem with the stabilised Swiss business sentiment indicators in Q1 2012, the successful implementation of a lower boundary in EURCHF at 1.20 by the SNB most certainly has been a supporting factor for the latest print of the consumer confidence index, too," said UBS economist Reto Huenerwadel.
The franc dipped 0.1 percent against the dollar to trade at 0.9386 by 0615 GMT compared to the New York close.
The franc was flat against the euro at 1.2009.