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Swiss GDP increase fails to rally franc

The Swiss franc has begun to lose ground versus the US dollar.

The performance of the Swiss economy narrowly beat analysts' expectations for the first quarter, but the franc continued to slip against the dollar on Thursday.

Figures released by the Swiss State Secretariat for Economic Affairs (Seco) showed first quarter gross domestic product was up 0.7 per cent compared with the fourth quarter of last year.

Year-on-year, GDP grew by a marginal 0.2 per cent reinforcing beliefs that the Swiss economy is recovering slowly, with no inflationary dangers, which should allow the Swiss National Bank to keep interest rates low, economists said.

They added that lower interest rates should help to deflect upward pressure on the Swiss franc.

Dollar expected to rise

US employment figures, due out on Friday, could drive up the value of the dollar. “I think we are at the start of a correction. I think we are on the way towards SFr1.60 [to the dollar],” a trader said.

Markets are focusing more on the direction of the dollar than the Swiss franc, amid signs that the US currency may rebound.

Economists had predicted that Switzerland’s GDP would increase by 0.3 to 0.6 per cent in the first quarter.

For the final three months of 2001, Seco revised the quarterly GDP figure downward to zero from 0.1 per cent.

The Swiss National Bank last lowered the target range for its key LIBOR (London Interbank Offered Rate) interest rate on May 2 by 0.5 per cent to 0.75 per cent – 1.75 per cent.

swissinfo with agencies

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SWI - a branch of Swiss Broadcasting Corporation SRG SSR

SWI - a branch of Swiss Broadcasting Corporation SRG SSR