The euro and the dollar rose against the Swiss franc on Thursday as traders remained jittery about possible intervention by the Swiss National Bank to weaken its domestic currency. The dollar was underpinned after the Federal Reserve did not expand its programme of buying government and mortgage debt and said at the conclusion of its policy-setting meeting on Wednesday it saw signs the deep US recession was easing.
Traders cited talk of the SNB selling francs for euros and dollars, possibly via the Bank for International Settlements, but both the SNB and BIS declined to comment. Market participants on Wednesday said that the SNB had been selling the Swiss currency for euros and dollars.
"In the wake of yesterday, people were always going to be nervous and we're in thinner summer markets and that always leaves potential for rumours or nerves to afflict markets," said Jeremy Stretch, strategist at Rabobank in London. Renewed weakness in the Swiss currency helped the dollar reverse earlier declines against a basket of major currencies.
The euro, however, was little changed against the dollar, but held below a two-week high hit on Wednesday as the market digested the impact of the European Central Bank's massive injection of one-year funds into money markets at Wednesday's tender. The ECB poured 442 billion euros of one-year funds into money markets on Wednesday with a record 1,121 banks taking up the offer.
By 1101 GMT, the dollar index was up 0.3 percent on the day at 80.776, reversing an earlier decline and well off a two-week low of 79.562 plumbed on Wednesday. The euro was barely changed at $1.3930, after hitting a two-week high of $1.4139 on Wednesday in the run-up to the Fed meeting.
Both the euro and dollar rose about 0.7 percent against the yen to 134.25 yen and 96.40 yen respectively. Some in the market said that euro/dollar trade around these levels may become volatile before options expire in New York. According to IFR, options worth 150 million euros with a $1.3960 strike price will expire later in the day, as will another batch worth the same amount with a strike price of $1.4000.
Earlier, the euro jumped to 1.5338 Swiss francs from around 1.5270 francs in a matter of a few minutes, while the dollar hit a session high of around 1.1016 francs from 1.0930 francs. The euro was last at 1.5335 francs, while the dollar bought 1.1005 francs.