The Swiss franc extended gains against the euro and the dollar on Friday as dismal euro zone data and little sign of action from the Swiss National Bank prompted safe-haven flows. Weak euro zone manufacturing data on Thursday compounded pessimism about the single bloc's stability, prodding investors into the safe-haven currency.
This and a notable lack of action from the SNB in recent days propelled the franc some 2 percent higher against the euro in the previous session. The Swiss National Bank has held off taking further action to weaken the franc since mid-August when it slashed its interest rate target to near zero and expanded the amount of cash it makes available to banks.
But the KOF economic institute said the SNB still had room to act. "The SNB has not yet played all its trump cards. At anytime it can decide on a lower limit for the Swiss franc-euro exchange rate," the KOF said in its September bulletin. "At the moment, however, their policy seems to have had enough of an effect to at least stabilise the appreciation."
The franc rose 0.8 percent against the euro compared to the New York close to trade at 1.1246 francs per euro, off lows of 1.1974 seen at the start of the week. "Liquidity is not that great at the moment, it looks like people went long on the euro at the wrong levels and are slowly getting stopped out," a trader said. "The next level of support is at 1.1230/50, with resistance at 1.1460, there's nothing before that. As liquidity dries up, bid-ask spreads are getting wider." Against the dollar the franc edged 0.7 percent higher, trading at 0.7894 francs per dollar. Investors will also eye US non-farm payroll data later for clues at to whether the Federal Reserve will ease monetary policy further at its next meeting.
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