| NEW YORK
NEW YORK The Swiss franc fell from record highs on Wednesday after the Swiss National Bank shocked the market with an interest rate cut, but the retreat should prove fleeting given mounting concerns about global growth.
The SNB said the franc was "massively overvalued," keeping alive the prospect of intervention.
That sharpened the focus on Japanese monetary authorities, who warned again they were uncomfortable with the rising yen.
The safe-haven franc has repeatedly hit record highs against the dollar and euro in recent sessions after weak manufacturing data stoked fears of a global economic slowdown. Concerns about fiscal health in the United States and Europe added to the allure of the Swiss currency.
"I am skeptical that the SNB actions will have more than a transitory 'psychological' negative impact on the Swissie if we remain in a risk-averse world," said Alan Ruskin, global head of G10 currency strategy at Deutsche Bank in New York.
"With the U.S. dollar not playing its traditional role as flight-to-quality vehicle, the flight from a wide array of risky assets is being funneled and concentrated into very few alternatives," he said. "In the world of fiat currency, the list of risk-aversion beneficiaries includes only one currency, the Swissie."
The euro had hit a record low of 1.07946 francs on trading platform EBS just before the SNB's move. It then rebounded sharply to last trade 1.6 percent higher at 1.1007.
The dollar also recovered from a record low of 0.7610 franc, last trading at 0.7685, up 0.7 percent on the day.
Analysts said the SNB will be wary of intervention to weaken the franc, having spent nearly $21 billion trying to check the currency's gains between March 2009 and June 2010.
"The SNB will be reluctant to intervene in the currency markets again after their intervention at 1.50 francs, which was perceived as being unsuccessful," said Adrian Schmidt, currency strategist at Lloyds Banking Group.
Hopes for a pickup in economic activity in the second half of the year were dealt another blow after reports on Wednesday showed the pace of growth in the U.S. services sector ticked down unexpectedly in July and the number of jobs created by the private sector slowed.
"The U.S. economy is stagnating. Clearly the job outlook is deteriorating right now," said Greg Salvaggio, senior vice president at Tempus Consulting in Washington. "So we are seeing the market very, very risk averse for the time being."
The U.S. Labor Department's nonfarm payrolls report, a key market factor every month, will be released on Friday. Economists polled by Reuters are forecasting a July increase of 85,000 jobs and a steady unemployment rate at 9.2 percent.
The euro gained against the dollar, rising 0.9 percent to $1.4322. Analysts cautioned that persistent pressure on peripheral debt markets, especially in Italy and Spain, is likely to limit the euro's rise.
Bond yields on Italian and Spanish debt are both rising to levels where the countries can no longer afford to raise money from capital markets.
The dollar hit a session low of 76.78 yen and last traded at 77.02, flat on the day. It hit a more-than-four-month low of 76.29 yen on Monday, just shy of its trough of 76.25 set in March, which triggered coordinated intervention by major central banks.
Attention is turning to the Bank of Japan, which could ease monetary policy at a meeting later this week. One possible step may be to expand the size of the BOJ's asset-buying scheme, which stands at 10 trillion yen.
(Additional reporting by Julie Haviv; Editing by Chizu Nomiyama)