The Swiss franc edged lower against the dollar on Friday as an expected rebound on stock markets outweighed an acceleration of Swiss inflation that doused speculation about an early interest rate cut. "Most people expected inflation to be high and took the data as a confirmation that the Swiss National Bank won't cut anytime soon," Clariden Leu analyst Sandro Baechli said.
"So markets turn to the rebound in share prices, which puts pressure on the franc." The franc fell 0.1 percent against the euro from the New York close, trading at 1.5998 per euro after briefly ticking higher on the Swiss inflation data.
It was 0.1 percent lower against the dollar at 1.1056 per dollar. Swiss consumer price inflation picked up to 2.4 percent in January, the highest annual rate in 14 years and above the Swiss National Bank's stability threshold of 2 percent for the first time since mid-1995.
"Higher than expected inflation figures at the same time as large parts of the real economy are still doing well would make it difficult for the SNB to justify rate cuts anytime soon," Calyon analyst Henrik Gullberg said. The franc had risen on Thursday, after European Central Bank President Jean-Claude Trichet's warning against growth risks in the euro zone paved the way for lower interest rates, which could diminish the rate difference with Switzerland.
The difference between rates in the euro zone and Switzerland's benchmark rate of 2.75 percent has long pressured the franc as investors borrow the Swiss currency to invest in higher-yielding euro-denominated assets.