(Adds detail, comment, latest data on sight deposits at SNB)
By John Revill
ZURICH, April 18 The Swiss government on Tuesday
played down Switzerland's reappearance on a U.S. Treasury watch
list of potential currency manipulators, saying the status would
have no immediate consequences.
"The Swiss National Bank, according to its legal mandate,
follows its own independent monetary policy," the Swiss finance
ministry said in a statement.
"Their currency purchases are not aimed at devaluing the
currency and raising the competitiveness of Swiss exports," it
added. "Its goal is to limit the extent of the franc's
overvaluation and prevent a strong downward push in inflation."
Switzerland, which was also mentioned by the Treasury last
October, appeared along with China, Japan, South Korea, Taiwan
and Germany on the latest list which aims to curb what the U.S.
calls "unfair currency practices".
The Swiss qualified because for years they have used foreign
exchange purchases to counter persistent inflows into the
safe-haven franc. The SNB has also introduced negative interest
rates to make the franc less attractive.
The SNB's foreign exchange reserves jumped by nearly 15
billion Swiss francs ($14.93 billion) in March to 683.18 billion
francs, larger than Swiss gross domestic product.
Sight deposits at the central bank, a proxy for currency
interventions, showed the SNB continued to sell francs ahead of
the French presidential elections starting on Sunday, according
to the latest data on Tuesday.
The SNB was not immediately available for comment.
Instead of market interventions, Switzerland should rely
more on fiscal policy and interest rates to support its economy
and ward off demand for the franc, the U.S. Treasury said in its
report on Friday.
Switzerland met two of its currency manipulation criteria --
having a material current account surplus at 10.7 percent of GDP
in 2016 -- and having engaged in a "sizeable one-sided foreign
exchange purchases", the U.S. report said.
At $13.7 billion Switzerland did not however have enough of
a bilateral trade surplus with the United States to meet the
third criteria, which could trigger bilateral talks aimed at
correcting the situation.
"As long as Switzerland is only on the watch list, it isn’t
a problem," said David Marmet, an economist at Zuercher
Kantonalbank. "Switzerland fulfils two of the three criteria,
but it cannot be long before the trade balance means it meets
all three, when it could become a problem.
"Still the Swiss will try to explain to the Americans their
situation," Marmet said. "I think the SNB would prefer not to be
on the list, but I don't think it will affect its monetary
policy – what else can they do?"
(Additional reporting by Angelika Gruber, Editing by Michael