The Swiss franc strengthened in early European trade on Thursday after markets digested comments from US Federal Reserve Chairman Alan Greenspan. The dollar had gained across the board on Wednesday after Greenspan signalled further increases in US interest rates. On Thursday, the dollar changed hands at 1.1863/68 francs down from 1.1915/18 francs late on Wednesday. Higher US interest rates tend to enhance the allure of some short-term dollar-denominated assets.

In prepared testimony to the Senate Banking Committee, Greenspan said the US economy was expanding at a healthy pace and that despite rate hikes by the Fed, the real fed funds rate "remains fairly low". He will give the second part of this twice-yearly testimony later on Thursday.

Earlier this month, Greenspan had caused ripples through financial markets after a speech in London where he sounded upbeat on prospects for a narrower US current account deficit, a key driver of the dollar's decline in recent years.

The euro stood at 1.5475 francs, from levels of 1.5475/80 on Wednesday.

Copyright Reuters, 2005