The Swiss franc held on to recent gains against the euro despite the European Central Bank's decision to hike rates to a near six-year high, widening the rate differential between Switzerland and the euro zone.
The franc was 0.1 percent weaker against the euro at 1.6438 francs per euro, but was still comfortably above a recent 8-1/2- year low of 1.6614 francs per euro. Against the dollar, the franc was also 0.1 weaker at 1.2173 francs per dollar. The franc gained ground versus the euro on Wednesday as jitters in the markets resulted in a higher aversion to risk.
Carry trades have kept the franc under pressure for months as investors borrow it to fund investments in the higher-yielding euro, taking advantage of the differential between Switzerland's short-term benchmark rate of 2.25 percent and the 4.00 percent in the euro zone. The Swiss blue chip index slid by over 1 percent on Wednesday, in line with markets across Europe, which saw the pan-European FTSEurofirst 300 index fall 1.6 percent.
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