Switzerland to meet US criteria for currency manipulator label, sources say

Switzerland will likely meet the criteria for the country to be identified as a currency manipulator by the US in an upcoming report from the US Treasury, according to people familiar with the matter.

Huge interventions by the Swiss National Bank this year to slow the appreciation of the Swiss franc will mean Switzerland will now satisfy all three criteria to be called a manipulator, the sources said.

Though uncomfortable for Switzerland, appearing on the list — which is expected in the next few weeks — does not automatically trigger sanctions or tariffs. The designation could lead to high level talks between the US and the Swiss to resolve the issue.

The SNB declined to say, while the US Treasury Department had no immediate say.

The SNB has spent 90 billion Swiss francs ($101.15 billion) in the first half of 2020 to slow down the rise as investors sought safe havens during the Covid-19 pandemic.

The figure is far above the 2% of GDP, a level above which the Treasury deems a country to be trying to manipulate its currency.

Switzerland also meets the other two criteria, by having a bilateral goods surplus of more than $20 billion and a current account of surplus of more than 2%.

The US Treasury list is aimed at identifying countries which it says are manipulating their currencies vs the dollar to gain an unfair trading advantage.

Though Switzerland will qualify for the currency manipulator label, the Treasury can hold back on using the term.

SNB Chairman Thomas Jordan has long stressed the need for the central bank to be able to make currency interventions to ease pressure on the franc, which he has consistently described as “highly valued”.

Interventions and negative interest rates have been the mainstay of the SNB's expansive monetary policy in recent years, and the US Treasury move will not change that.

The Swiss have long argued that they are not trying to weaken the franc to gain a trade advantage, but is rather driven by the SNB's monetary policy, which aims for price stability.