Swiss franc lower vs euro as ECB seen holding rates

Thu Feb 7, 2013 2:53am EST

* Franc slips vs dollar, euro

* Better market sentiment lifting euro

* Swiss consumer sentiment improves, though still weak

ZURICH, Feb 7 (Reuters) - The Swiss franc ticked lower against the euro and the dollar on Thursday as improving euro zone sentiment continued to buoy the single currency, with the European Central Bank (ECB) expected to leave interest rates on hold later in the day.

Traders were reluctant to take large positions, with many expecting that a pause in the recent rally in risk assets could support safe haven assets like the franc and the dollar, reversing recent weakness.

The ECB is unlikely to respond to the growing political concern that the recent euro strength could weigh on exports, creating an obstacle to the euro zone's economic recovery.

"While clearly uncomfortable from a growth perspective, the rise in the euro will be rationalised as a reflection of better market sentiment towards eurozone assets," said analysts at Credit Agricole in a note.

"In fact the ECB could be a cause of euro strength with its shrinking balance sheet playing a role in supporting euro, especially as it contrasts with the Fed's balance sheet expansion."

Further, for the first time in three years, activity in the options market indicates that investors expect gains in the euro in coming months, instead of losses.

The franc was 0.1 percent lower against the euro compared to the New York close, trading at 1.2317 francs per euro at 0740 GMT.

The franc was 0.1 percent lower against the dollar at 0.9108 francs per dollar.

Meanwhile, data out earlier showed that while Swiss consumer sentiment for January improved, it remained weak.

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