By John Revill

ZURICH--Switzerland's KOF leading economic indicator slipped to its lowest level in three-and-a-half years in June as the country's manufacturers struggled with the higher value of the Swiss franc.

The index dropped three points to 89.7 in June, from a downwardly revised 92.7 in May, according to data released on Tuesday. This was weaker than economists' expectations of 93.6. The reading for May was originally reported at 93.1.

The reading was the lowest since December 2011 and indicated that prospects for the Swiss economy "have become more negative for the coming months," KOF said.

The barometer, calculated by the KOF think tank, forecasts the development of the Swiss economy in about six months' time.

The decrease was driven by negative sentiment in the industrial sector, with the metal and wood sector being particularly downbeat. Indicators that covered foreign demand also contributed negatively to the barometer, particularly those that supply to Europe.

The reading is the fifth of the indicator to fully represent feeling among Swiss businesses since the Swiss National Bank scrapped its cap on the franc's value since the euro. Since the surprise decision on Jan. 15, the franc has soared in value, putting pressure on Swiss exporters.

The SNB on Monday said it had intervened in the currency markets to check a further rise in the franc amid concerns about the worsening financial situation in Greece.

Write to John Revill at john.revill@wsj.com