The Swiss franc edged lower against the dollar and the euro in early European trade on Thursday, with dealers focused on the message from the European Central Bank's meeting later in the session. The European Central Bank has increased its anti-inflation message in recent weeks, triggering talk that it will lift its key interest rate from 2 percent in December or early in 2006 to end two-and-a-half years of steady interest rates.

The dollar last traded at 1.2786/89 Swiss francs, up from 1.2776/79 in late trading in Europe on Wednesday. The euro stood at 1.5423/27 francs, also up from 1.5414/19 francs on Wednesday.

However, dealers said the lull in the franc was likely to be short-lived. "We expect the potential for lower euro/franc readings for fundamental reasons to be rather limited going forward," UBS market analysts wrote in a daily research note.

The franc has witnessed a slew of strong Swiss economic data - boosting interest rate expectations - tarnished only slightly by Tuesday's purchasing managers' index, which eased in October to a seasonally adjusted 56.8 points from 57.5 points in September.

Copyright Reuters, 2005