The Swiss franc eased against the euro but strengthened against the dollar on Tuesday ahead of a key interest rate decision by the US Federal Reserve later on Tuesday and a Swiss National Bank rate decision on Thursday.
Markets have fully discounted a quarter-point cut in the Federal Reserve's benchmark rate later on Tuesday but recent positive US economic data has dashed expectations of a more aggressive move. By contrast, the SNB is expected to hold interest rates steady on Thursday despite booming economic growth and higher inflation, as the risks from the credit crisis loom large, a recent Reuters poll showed.
The franc was 0.08 percent easier against the euro at 1.6608 francs compared to the New York close, while against the dollar the Swiss currency was up 0.2 percent at 1.1257 francs. Analysts said that as the year-end holiday break approached, the Swiss currency could be in for an increasingly jumpy ride as trading volumes dwindle.
"With liquidity volumes thinning out going into to the end of the year, we have to be prepared for erratic trading in the CHF (Swiss franc) exchange rates," said UBS economist Reto Huenerwadel in a research note. Money markets appeared to be already discounting interest rate rises by the Swiss National Bank in 2008, said Huenerwadel.
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