Swiss franc cuts losses vs dollar, weakness seen ahead

Fri Feb 22, 2013 2:38am EST

* Franc regains ground vs dollar, unchanged vs euro

* Risk appetite rocked by Fed debate, weak euro zone data

* Dollar strength, euro weakness expected

ZURICH, Feb 22 (Reuters) - The Swiss franc clawed back some ground against the dollar on Friday after moving sharply lower the previous session as a U.S. Federal Reserve debate on scaling back loose money policies sent the greenback soaring against major currencies.

A switch in focus to global macroeconomic question marks such as euro zone growth and the U.S. fiscal deficit has dented risk appetite, with many investors trimming equities positions and buying the safe-haven dollar.

The franc was steady against the euro, which had come under pressure in the previous day's trading on weak euro zone data and uncertainty ahead of Italy's election this weekend.

The franc continues to shadow the euro, as it has since the Swiss National Bank imposed a 1.20 per euro cap in September 2011 to stave off a recession and deflation, although this year it has traded below the tight 1.20-1.22 range that prevailed for almost the whole of 2012.

Despite the early session softness in the dollar, economists and technical analysts said a range of factors would continue to support it against other currencies, with the euro - and by extension the Swiss franc - particularly vulnerable.

"The continued fallout from Fed FOMC minutes, disappointing PMIs yesterday, Italian election uncertainty and likely lower than expected ECB LTRO repayments today suggests that the euro-dollar will face more downside risks," said Credit Agricole forex strategist Mitul Kotecha.

The franc was 0.2 percent higher against the dollar compared with the New York close, trading at 0.9291 francs per dollar by 0715 GMT.

The franc was steady against the euro at 1.2277 francs per euro.

For polls, indicators and stories on the Swiss economy, click on:.

(Editing by Pravin Char)

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