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Switzerland No Longer a Currency Manipulator, According to US

Switzerland No Longer a Currency Manipulator, According to US

06 December 2021

US Treasury Department confirmed in its new report that Switzerland is no longer a currency manipulator. The country was labelled as one last December.

No Longer a Currency Manipulator

              US Treasure Department confirmed on Friday that Switzerland is no longer considered a currency manipulator. Back in April, it stated that the was "insufficient evidence" to designate Switzerland a currency manipulator, even though the country met two out of three conditions required to get that infamous label. Now, US confirmed Switzerland is not considered a currency manipulator at all, but its Treasury Department will continue to take a look at the Swiss National Bank’s interventions on foreign exchange rate market. In its semi-annual report, US has not accused any country of being a currency manipulator, but 12 countries are still closely monitored by the US over their currency policy. The US Treasury Department’s report is focusing on the countries that have large trade surpluses due to heavy interventions on foreign exchange market in order to stop their currencies’ exchange rates from getting too strong. As a result, their exports become more competitive.

SNB Is in Contact

              After US Treasury Department’s report, the SNB has issued its separate statement, in which it stated it would remain in contact with the US government. Switzerland’s Federal Department of Finance said that: "Switzerland does not manipulate the franc", and that the central bank’s interventions "are necessary for Swiss monetary policy, to ensure appropriate monetary conditions and thus guarantee price stability.”

Labelled

              Switzerland got in trouble over its expansive monetary policy aimed at stopping CHF exchange rate from getting out of control. Last December the country was labelled a currency manipulator. At the end of the year, the SNB’s total assets hit CHF999 billion, compared to CHF861 billion one year earlier, and total currency reserves were at CHF962 billion. Majority of these were held in form of foreign currencies. The foreign currency purchases and huge trade surplus meant there were two out of three threshold required to get a label of currency manipulator. The country needs to have a minimum $20 billion bilateral trade surplus with the US, foreign currency intervention exceeding 2% of Gross Domestic Product, global current account surplus exceeding 2% of GDP to get on the infamous list. The SNB spent a lot of money on interventions as in times of COVID-19 pandemic many people turned to buy Swiss francs as a safe-haven currency, which made its exchange rate very strong. Then in April, Switzerland was removed from the list, together with Vietnam and Taiwan, after US stated that there is no sufficient evidence to proof these countries are manipulating its exchange rates. Currently, Swiss account surplus is below the threshold required to be labeled a manipulator.

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