ZURICH: The Swiss franc rose slightly against the dollar on Tuesday, holding the previous session's gains after disappointing US manufacturing data pushed some investors to prune their positions in the greenback. The franc was little changed against the euro and continues to mirror movements in the single currency closely, as it has done since the Swiss National Bank imposed a 1.20 per euro cap in September 2011 to stave off deflation and a recession. The Swiss purchasing managers index, due at 0730 GMT, is expected to show manufacturing activity grew for a third straight month, although at a slowing pace. Weak demand from the euro zone, Switzerland's biggest trading partner, is keeping overall demand for Swiss exports in check, although the SNB cap on the franc has helped some Swiss exporters to remain competitive. By 0759 GMT, the franc was trading at 1.2159 to the euro, unchanged from the previous session's New York close. The franc was up 0.1 percent against the dollar, at 0.9455 francs per dollar. Despite firming against the dollar in the early part of this week, analysts said upside for the common currency is limited due to political uncertainty in Italy, ongoing concerns over the effects of the Cyprus bailout and worries about the region's debt problem and sluggish economic outlook. The European Central Bank holds its policy meeting on Thursday, ahead of U.S. non-farm payrolls on Friday. "As the fundamental outlook for the euro region turns increasingly bleak, the ECB remains poised to strike a dovish tone for monetary policy," said David Song, currency analyst at DailyFX. "We may see a growing number of central bank officials show a greater willingness to push the benchmark interest rate to a fresh record-low as the recession threatens price stability." A further cut in euro zone interest rates, already at record lows, could induce many of the more risk-tolerant investors to sell the single currency and buy higher-yielding units.

Source