SYDNEY (Reuters) - The Swiss franc slipped against the euro early on Monday after the Swiss National Bank affirmed its pledge to cap the currency as voters rejected proposals for the central bank to boost its gold reserves.
The other major currencies were more subdued with the euro a touch firmer against both the US dollar and yen at $1.2452 and 148.05 respectively. The greenback held firm at 118.86 yen, just below a seven-year peak of 118.98 set late in November.
The "Save our Swiss gold" initiative would have forced the Swiss National Bank (SNB) to boost its gold reserves to 20 per cent of its assets, from around 8 pe rcent currently, and banned it from ever selling the metal. That would threaten its ability to defend a 1.20 euro cap on the franc.
Investors, who had been buying the franc against the euro, were forced to unwind those bets early on Monday, causing the euro to jump to 1.2040 francs from around 1.2018 late on Friday.
The SNB said it welcomed the rejection of the popular vote, and reiterated its pledge to defend the cap.
"The result should of course temporarily relieve the pressure on the SNB's currency floor, albeit whilst doing little or nothing in our opinion to reverse the fundamental downward trajectory of EUR/CHF," said JPMorgan analyst Paul Meggyesi. "At this stage the SNB needs to act on interest rates in order to create a pull factor to incentivize short-term capital outflows from the franc."
Gold is expected to weaken in the wake of the Swiss vote, joining a rout in oil and iron ore prices. All of this provides no incentive for investors to buy commodity currencies such as the Australian dollar.
As a result, the Aussie was again probing fresh four-year lows against the dollar. It fell as far as $0.8449 from above 85 U.S. cents late on Friday, reaching a low not seen since July 2010.
Its near term direction could depend on the latest reading of China's manufacturing sector due at 0100 GMT. Analysts polled by Reuters expect activity likely slowed slightly in November on sluggish demand.
The Aussie also has a slew of local data to contend with on Monday including business inventories and company profits, which should give a clearer picture of third-quarter GDP due on Wednesday.