The Swiss franc swung into positive terrain against the yen and the euro immediately following the Swiss National Bank decision to hold libor and the franc cap in the early European deals on Thursday.
However, the alpine unit drifted weaker against the pound and the dollar as the Fed-induced risk-aversion returned in the market, with weak China data adding additional pressure to risk sentiment.
The Swiss National Bank decided to retain the currency ceiling at CHF 1.2 per euro and said it stands ready to enforce the franc cap, if necessary, by buying foreign currency in unlimited quantities.
The minimum exchange rate is an important instrument in avoiding an undesirable tightening of monetary conditions, the central bank said.
The bank maintained its view that the Swiss franc remained high. "An appreciation of the Swiss franc would compromise price stability and would have serious consequences for the Swiss economy," it said.
The target range for the three-month Libor was left unchanged at 0.0-0.25 percent. The decision was in line with economists' forecast.
The SNB lowered its forecast for consumer prices this year. The bank now expects prices to fall 0.3 percent in 2013 compared with a 0.2 decline forecast in March. The inflation outlook for both 2014 and 2015 was left unchanged at 0.2 and 0.7 percent respectively.
The bank retained its growth forecast for the economy at 1.0-1.5 percent for 2013.
In economic news, Switzerland's merchandise trade surplus increased notably in May to CHF 2.22 billion, higher than CHF 1.7 billion recorded in April. However, economists had forecast a bigger surplus of CHF 2.4 billion for May.
The Federal Reserve Chairman Ben Bernanke signaled that the central bank could begin reducing its monthly bond-buying program later this year, with the goal of ending it entirely in mid-2014 if economic conditions warrant.
Additionally, a private survey showed that China's manufacturing activity shrank at a faster pace to a 9-month low in June, stoking concerns about the outlook for global growth.
Germany's manufacturing activity declined at a faster rate in June, defying economists' expectations that the downturn would ease, latest data showed today.
The seasonally adjusted purchasing managers' index for the manufacturing sector dropped to a two-month low of 48.7 in June from 49.4 in May, data from a survey by Markit Economics and BME revealed. Economists had forecast the index to rise to 49.9.
German producer price inflation rose 0.2 percent year-on-year in May, faster than a 0.1 percent increase in the previous month. Economists had forecast an increase of 0.3 percent. On a monthly basis, PPI fell 0.3 percent.
Eurozone's composite output index improved to 48.9 in June from 47.7 in May. The reading also exceeded consensus forecast of 48.1.
The U.K. retail sales volume including automotive fuel grew 2.1 percent in May from a month ago, when it was down 1.1 percent, the Office for National Statistics showed today. It was stronger than the expected 0.8 percent increase.
Japan's leading economic index rose to 99 in April from a revised 97.7 in March. Initially, the index was estimated to increase to 99.3.
The franc fell to a 2-day low of 1.4463 against the pound around 5:50 am ET, down almost 0.8 percent from its post-SNB peak of 1.4353 and well-below Asian session's weekly high of 1.4320. The next likely support for the franc is seen around the 1.4500/05 level, its 50-day SMA.
The Swiss franc also slipped to a 10-day low of 0.9360 against the US dollar, a 0.9 percent depreciation from yesterday's close of 0.9277. On the downside, the next support area is visible at 0.94 for the franc in the near-term.
On the flip-side, Switzerland's currency climbed to a 9-day high of 105.36 against the yen and a session's high of 1.2303 against the euro following the SNB action.
The euro-franc pair has been swinging back and forth in broad ranges of 1.2346 and 1.2307 as the session rolled on. The franc-yen pair also erased some of its gains and was staying below the key 105.0 level around 7:00 am ET.
Traders seek further signs of U.S. economic recovery in the North American session from data on the U.S. weekly jobless claims for the week ended June 15, existing home sales and leading indicators index-both for May and the Philadelphia Fed's manufacturing index for June.
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