Thomas Jordan, the chief executive of the Swiss central bank, rejected US criticism that the SNB is manipulating its currency.

Thomas Jordan recalled that Swiss monetary policy was focused on price stability and not on granting itself commercial advantages. (KEYSTONE)

The  Swiss National Bank (SNB) did not move one iota on Thursday on its monetary policy, while Washington accused the Confederation of "manipulating" its currency. Faced with the pandemic crisis, the issuing institution has no choice but to support the Swiss economy and avoid an excessive increase in the price of the franc.

"The SNB is not a currency manipulator ," Thomas Jordan, chairman of the Swiss central bank's governing body, told a televised press conference. The central banker insisted that Swiss monetary policy was focused on price stability and that the objective was not to gain advantages in terms of trade.

The day before, the United States had accused Switzerland, alongside Vietnam in particular, of manipulating its currency to gain an undue commercial advantage, according to a semi-annual report published by the US Treasury Department. The latter wants to "encourage" the adoption of decisions that "will make it possible to adjust effectively the balance of payments and eliminate the unfair advantages at the commercial level resulting from these operations".

Despite this attack, Mr. Jordan insisted on the cordial relations between Bern and Washington. The departure in January of President Donald Trump, who will be succeeded by Democrat Joe Biden, will not change that relationship, he said.

Switzerland, which acquired 90 billion francs worth of foreign currency in the first half of the year, wants to make its point of view known to the US administration. The latter had recommended that Bern opt for the quantitative easing tool (QE), but Thomas Jordan rejected this idea, arguing that the Swiss debt market was relatively small and did not lend itself to this kind of operation.

The head of the issuing institution also stressed that the SNB had taken "an important step forward in terms of transparency", by now publishing at the end of each quarter the details of interventions on the foreign exchange market.

"Minimal" consequences

In fact, the SNB on Thursday kept its monetary policy unchanged, leaving the key rate applied to sight deposits at -0.75%. "Given the high level of the franc", it also said it was ready to intervene "more" in the foreign exchange market taking into account the situation. for all currencies, i.e. not only the euro.

Since the beginning of the year, the franc has shown strong fluctuations against the single European currency. Currently at 1.0806 francs per euro, the Swiss currency is expected to end the year roughly at January level. The situation is different against the greenback, against which the Swiss currency has continued to appreciate. While trading at 0.9674 francs to the dollar in January, the currency pair strengthened to 0.8838 USD/CHF in mid-December.

The Swiss issuing institution also continues to "generously supply" liquidity to the banking system through the BNS-Covid-19 refinancing facility, in order to avoid a credit crunch.

According to Thomas Jordan, "an expansionary monetary policy remains necessary to overcome the crisis." For the head of the Swiss central bank, "the economic recovery will still take time and uncertainty will remain high".

For analysts at Daily FX, the US authorities could impose sanctions and raise tariffs against Switzerland. But this scenario is unlikely, especially with the arrival of Joe Biden in the White House and Janet Yellen in the Treasury. The new US government could reconsider the decision to place Switzerland on the list of currency manipulators as early as April 2021.

Specialists in UBS were also optimistic, believing that the consequences for the franc and trade relations between Switzerland and the United States "will be minimal". In the immediate future, however, the franc could become more expensive against the dollar.

Thomas Jordan recalled that Swiss monetary policy was focused on price stability and not on gaining commercial advantages.