* Dollar drops after stronger data erodes safe-haven demand
* Philly Fed factory slump eases sharply in June
* Euro/Swiss franc rises on talk of intervention
* BIS, SNB decline comment on the rise in euro/Swiss
(Updates prices, adds comment, changes byline)
By Wanfeng Zhou
NEW YORK, June 18 (Reuters) - The U.S. dollar fell against
the euro and higher-yielding currencies on Thursday after a
report showing improving regional business conditions dented
safe-haven demand for the greenback.
Action in the euro was particularly heavy, with the single
European currency jumping versus the Swiss franc amid
speculation the Bank for International Settlements was buying
euros on behalf of the Swiss National Bank to defend the
1.50-franc level.
Demand for the dollar fell after the Philadelphia Federal
Reserve Bank said on Thursday its business activity index for
the U.S. Mid-Atlantic region rose sharply to minus 2.2 in June
from minus 22.6 in May. That was the highest since September
2008 and well above economists' expectations of minus 17. See
[].
"The dollar is overall somewhat on the defensive after the
Philly Fed report," said Vassili Serebriakov, currency
strategist at Wells Fargo in New York. "The improvement was
quite notable across the board in the release."
"It's probably good for risk appetite and good for
commodity currencies," he added.
In early afternoon trading in New York, the euro was up 0.2
percent against the dollar <EUR=> to $1.3969 after rising as
high as $1.4002.
The dollar rose 0.8 percent against the yen to 96.46
<JPY=EBS>, extending gains in afternoon trading as a rise in
U.S. stocks put pressure on the yen, another safe-haven
currency.
Higher-yielding, commodity currencies advanced, with the
Australian dollar up 1.5 percent at US$0.8044 <AUD=D4> and the
New Zealand dollar 1.8 percent higher at US$0.6434 <NZD=D4>.
Further evidence that the recession is fading came from the
Conference Board's forward-looking measure of the U.S. economy
for May, which posted its biggest increase in five years.
Separate government data showing a decline in continued jobless
claims added to improved risk appetite. [].
SWISS FRANC IN FOCUS
The euro surged to 1.5149 francs on electronic trading
platform EBS <EURCHF=> from 1.5008. It was last at 1.5135
francs, up 0.5 percent on the day.
Several traders in the United States and London said they
saw bids from the BIS in the currency market for the euro and
offers to sell the Swiss franc. The BIS and SNB both declined
to comment. [].
"It looks like the BIS have been in ... it's probably fair
to say it's SNB-related," a London-based trader said.
The Swiss franc's move came after the SNB held interest
rates at a record low on Thursday, keeping its target rate for
three-month Swiss franc LIBOR at 0.00-0.75 percent with an aim
to lower it to 0.25 percent. []
SNB Governor Jean-Pierre Roth said he would continue to stop
an irrational rise in the Swiss franc, but analysts said he did
not confirm the SNB had acted beyond initial intervention after
its last policy meeting on March 12 when the euro jumped to
nearly 1.5350 francs from around 1.4750 francs.
Strategists at Danske Bank said if there were any doubts,
the SNB has assured investors that it will continue to act to
prevent a potential appreciation of the Swiss franc against the
euro.
"We remain confident that the SNB will in fact be
successful in securing a floor below EUR/CHF -- with 1.50
looking quite robust," they wrote in a note.
Markets were constantly on the alert for SNB action after
the bank in March stunned the global foreign exchange market
and bought euros and dollars versus the Swiss franc. Before
that, the SNB had last physically intervened in August 1995.
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by
Padraic Cassidy)
