ZURICH: The Swiss franc lost ground alongside the euro against the dollar on Wednesday, but underlying support for the single currency stayed intact ahead of a European Central Bank meeting.
The franc has been trading in tandem with the euro against the dollar ever since the Swiss National Bank capped the franc at 1.20 per euro a year ago to ward off deflation and a recession.
On Thursday the ECB is expected to unveil details of a long-awaited bond-buying plan, which market participants hope will ease the euro zone's debt crisis.
The Swiss economy performed surprisingly well after the cap was set last year. Yet it suffered an unexpected contraction in the second quarter, data showed on Tuesday, as the euro zone crisis caught up with a country that seemed relatively immune to its neighbour's woes, providing further justification for the cap on the franc.
Swiss consumer price data for August is due later on Wednesday and will give further insights into deflation risks ahead of the SNB's policy announcement on Sept. 13.
"The deflation over the past year makes a little more sense following yesterday's GDP data, but today's CPI data are arguably the more important for the SNB," said Michael Turner, currency strategist at Royal Bank of Canada Capital Markets.
The franc fell 0.3 percent against the dollar to trade at 0.9586 by 0640 GMT compared to the New York close.
