Dollar gains ground against Swiss franc, hits highs vs. euro

Dollar gains ground against Swiss franc, hits highs vs. euro

© Dado Ruvic / Reuters

NEW YORK (Reuters) - The U.S. dollar and the euro gained a little ground against the Swiss franc on Friday, a day after the Swiss National Bank shocked markets by scrapping a currency cap, while the dollar hit new multi-year highs against the euro on expected European Central Bank easing.

The euro suffered its biggest-ever one-day fall against the franc on Thursday, dropping more than 18 percent, after the SNB stunned markets by scrapping its three-year-old pledge to limit the franc's value to 1.20 per euro.

After falling as much as 30 percent to a record low of 0.8500 franc in the minutes following the SNB's move on Thursday, the euro was last trading on Friday at 0.99040 franc, up 1.6 percent on the day but still nearly 18 percent below where it was before the SNB decision.

Volatility lingered and liquidity in franc trading was low as investors grappled with the SNB's move, analysts said.

"Traders don't know what the new equilibrium price is on the Swiss franc," said Greg Anderson, global head of FX strategy at BMO Capital Markets in New York.

The dollar last traded at 0.85670 franc , up 2.1 percent on the day but still about 16 percent below where it was before the cap was scrapped. Thursday's sharp acceleration in the franc resulted in the currency's first weekly gain against the dollar since early December.

Dealers speculated the Swiss had moved because they knew the ECB would take the plunge into full-scale quantitative easing, effectively printing hundreds of billions of euros, at its next policy meeting on Jan. 22.

The view that the SNB move was a sign the ECB would announce outright money-printing in an effort to combat deflation in the euro zone drove the euro to a fresh 11-year low against the dollar of $1.14595 on Friday. The euro was last down 0.6 percent to trade slightly up from the 11-year low, at $1.15635.

"It seems that an ECB QE program is imminent," said Thierry Albert Wizman, global interest rates and currencies strategist at Macquarie Ltd in New York.

Against the safe-haven yen, the dollar was up 1.3 percent at 117.640 yen . The dollar index <.dxy>, which measures the greenback against a basket of six major currencies, was last up 0.32 percent at 92.645 to notch its fifth straight week of gains.

(Reporting by Sam Forgione Additional reporting by Jemima Kelly in London; Editing by James Dalgleish)