BASEL: The Swiss National Bank's massive foreign currency purchases to weaken the Swiss franc are not a deliberate 'beggar-thy-neighbour' approach to gain unfair advantage at the expense of Switzerland's trade partners, SNB Chairman Thomas Jordan said.
The central bank has been selling francs for foreign currency in vast amounts for years to keep a lid on the soaring currency, whose rise has spelt danger for Switzerland's export-reliant economy.
The interventions -- which have inflated the SNB's foreign currency holdings to 742 billion Swiss francs ($747.76 billion) -- have attracted the attention of the US Treasury looking to crack down on international currency manipulators.
Switzerland's current account surplus of around 10 percent of GDP - the seventh-largest surplus in the world - was another cause for concern for US officials, who put Switzerland on a watch list along with China, Japan, South Korea and Germany.
Jordan said the SNB had to be active in the currency markets because reducing interest rates was not enough to steer monetary policy in the current low-rate environment.
"Our foreign exchange market interventions do not amount to a mercantilist policy at the expense of Switzerland's trading partners or a beggar-thy-neighbour strategy," Jordan said in remarks prepared for a conference in Basel on Thursday.
"Rather, this policy provides the SNB with a necessary instrument for ensuring price stability and for fulfilling its mandate."
Switzerland has been on the US Treasury's monitoring list since 2016 and appeared again in October on the list which aims to curb what the US calls "unfair currency practices".
Switzerland met two of its currency manipulation criteria -- having a material current account surplus at 10.3 percent of GDP and having engaged in a "sizeable one-sided foreign exchange purchases", the US report said.
Switzerland's $6.6 billion first-half bilateral trade surplus with the United States fell short of the third criteria, which could have triggered bilateral talks aimed at correcting the situation.
"We are maintaining a constructive dialogue on this matter with the responsible government agencies in the US," Jordan said.
Switzerland's high current account surplus was not due to currency interventions, he said, but to special factors like the country's ageing population and strong presence of merchanting and pharmaceuticals companies which were less affected by the currency's strength.
Despite a slight weakening of the franc, Jordan described the currency as "remaining highly valued."
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