Swiss Had Good Exchange With US on Currency, SNB Chief Says

(Bloomberg) —

Switzerland has had productive talks with the US on the central bank’s currency interventions, Swiss National Bank President Martin Schlegel said, rejecting the suggestion that the country manipulates the franc’s exchange rate.

“We are no currency manipulator,” he said in Lucerne on Friday, adding that “we had constructive conversations with the US authorities” on the topic. 

Schlegel declined to further elaborate on the format or content of those talks, though a spokesperson later said that the SNB has an ongoing exchange with US authorities, especially with the Department of the Treasury.

The central bank chief pointed out that historically, the SNB has only ever intervened on the franc to meets its price stability directive. 

“We have never influenced the exchange rate to get us an advantage,” he said. “We only acted to ensure we fulfill our mandate under the given global economic conditions.”

The franc is typically seen as a haven currency in times of market stress, with the recent market uncertainty triggered by US President Donald Trump’s tariff policy pushing it to a decade high against the dollar last month and near such a high against the euro. 

The SNB’s past interventions earned Switzerland a currency manipulator tag during Trump’s first term, though that label was subsequently removed. Schlegel has repeatedly said that the threat of that classification won’t stop the institution from steering the currency if required.

By selling some of its own reserves in foreign denominations, the SNB can strengthen the exchange rate. In 2022 and 2023, it boosted the franc in this way to dampen domestic inflation by making imported goods cheaper.

For several years before that, it had used the mechanism in the opposite direction to keep a lid on the currency. This has seen the SNB’s balance sheet grow to a size some observers deem dangerous as it can yield large profits — as last year — but also large losses.

The latest data show that the Swiss central bank hardly stepped into currency markets in 2024. First-quarter numbers will be available at the end of June.

The SNB is just a month away from its next monetary policy decision, with markets and economists expecting a 25 basis-point reduction to zero at that meeting. Asked if officials may have to embrace negative rates, Schlegel said that “if the economic situation dictates that the interest rate needs to be at that level, then we will go there.”

“I think this is a bit of verbal intervention hoping the franc reacts negatively as markets price in higher chance of negative rates,” said Francesco Pesole, FX strategist at ING Bank NV.

The SNB president also said: 

• On the economy: “We are not expecting a recession in Switzerland”
• On banking regulation: “It is a bold assumption that software is loss-absorbing in a crisis. Software should not be counted towards banks’ regulatory capital.”

–With assistance from Naomi Tajitsu.

(Updates with comment from ING in 12th paragraph. An earlier version of the story was corrected to remove extra material left at the time of publishing)

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