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US no longer considers Switzerland a currency manipulator

Swiss National Bank
SNB foreign currency interventions last year were at their highest level since 2012. © Keystone / Anthony Anex

The United States has removed Switzerland from its list of currency manipulators despite the Swiss National Bank (SNB) spending CHF110 billion ($119 billion) in the foreign exchange market last year.

Reporting to Congress on Friday, the US Treasury Department saidExternal link it had “determined that there is insufficient evidence to make a finding that Vietnam, Switzerland, or Taiwan manipulates its exchange rate”.

However, the Treasury added that it would continue with “enhanced engagement” with Switzerland. “This engagement includes urging the development of a plan with specific actions to address the underlying causes of currency undervaluation and external imbalances.”

China, Japan, Korea, Germany, Ireland, Italy, India, Malaysia, Singapore, Thailand, and Mexico are also being closely monitored by the US for their currency practices.

The US labelled Switzerland a currency manipulator in December, but the SNB said this would not affect its monetary policy strategy.

Label

To earn the label of currency manipulator a country must have a minimum $20 billion bilateral trade surplus with the United States, foreign currency intervention exceeding 2% of Gross Domestic Product and a global current account surplus exceeding 2% of GDP.

The coronavirus pandemic put extra pressure on the Swiss franc as a safe haven currency last year. This caused the SNB to raise its foreign currency intervention to the highest levels since 2012.

At the end of 2020, the SNB’s total assets came to CHF999 billion, compared to CHF861 billion one year earlier. Total currency reserves stood at CHF962 billion at the end of 2020. The majority of these reserves (91%) was held in the form of foreign currency investments, the remainder in gold (5%).

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