The Swiss franc edged lower against the dollar and remained under pressure against the euro on Tuesday as tame Swiss inflation data dampened expectations of another interest rate hike in Switzerland. Consumer price inflation picked-up to 0.7 percent in September, driven by higher oil prices, but the price rise was lower than expected.
"The recent moderation in retail sales and the sharp drop in the September PMI may suggest the credit crisis will impact on the real economy after all," Henrik Gullberg from Calyon said. "Combined with the persistent lack of inflationary pressures this will provide the SNB with enough justification not to hike rates again in December," the analyst said.
The Swiss franc was at 1.6637 francs per euro, little changed on the day after hitting a fresh 2-month low earlier in the session at 1.6652. The franc fell to a 9-year low at 1.6687 per euro in late July as investors made use of Switzerland's low interest rates to fund carry trades to invest in higher-yielding currencies.
Swiss National Bank comments indicating that the benchmark rate of 2.75 percent was on hold for now and signs of a slowdown of the booming economy have dampened expectations that the rate difference with the euro zone will diminish any time soon.
The Swiss government raised its growth forecast for 2007 to 2.6 percent on Tuesday, but said the risks to its 2008 forecast of 1.9 percent had increased due to the credit crisis. The franc was at 1.1712 per dollar, down 0.2 percent on the day, moving off the a 2-1/2 year high around 1.1620 hit on Monday.
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