According to the latest report by the U.S. Department of the Treasury released this week, Switzerland is no longer defined as a currency manipulator, a status it has held for some time.
To be classified as a currency manipulator by the U.S. Treasury a nation has to fulfil three criteria. It has to have a bilateral trade surplus with the United States of at least $15 billion, a current account surplus of at least 3% of GDP and a persistent, one-sided intervention in the foreign currency market.
Currently, only two economies meet all three criteria: Taiwan and Vietnam. Switzerland’s foreign currency purchases and its large trade surplus with the United States met the U.S. currency manipulation criteria, but its current account surplus fell just below the threshold required for the country to be labeled a manipulator, removing it from the list.
Switzerland does not engage in any manipulation of the Swiss franc, said the Swiss Finance Ministry after the U.S. Treasury report was published. It does not attempt to prevent balance of payments adjustments nor does it try to obtain unfair competitive advantages for the Swiss economy.
Between 2007 and 2020, the Swiss National Bank’s balance sheet expanded significantly from 21% of GDP to nearly 145% of GDP, mainly through foreign asset purchases, making it one of the largest central bank balance sheets in the world relative to GDP. By the end of June 2021, Switzerland’s foreign currency reserves stood at $1 trillion, up from $896 billion at end-June 2020. At the end of June 2021, reserves covered 82% of Switzerland’s short-term debt and 129% of its GDP.
Switzerland’s US$ 1.0 trillion of foreign exchange reserves, makes it the third highest after Japan (US$ 1.3 trillion) and China (US$3.2 trillion). Nearly 8% of total global reserves were held by Switzerland at the end of June 2021.
However, Switzerland is not entirely off the hook. It joins China, Japan, Korea, Germany, Ireland, Italy, India, Malaysia, Singapore, Thailand and Mexico on a U.S. Treasury Monitoring List.
U.S. Treasury report (in English)