According to the latest US Treasury Department report 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 US Treasury, a nation must meet three criteria. It must 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 persistent and unilateral intervention in the currency market.
Currently, only two economies meet all three criteria: Taiwan and Vietnam. Switzerland’s foreign exchange purchases and its large trade surplus with the United States met the criteria for manipulation of the US currency, but its current account surplus fell just below the threshold required for the country to qualify as manipulator, removing it from the list.
Switzerland does not engage in any manipulation of the Swiss franc, the Swiss finance ministry said after the release of the US Treasury report. It does not seek to prevent balance of payments adjustments or to obtain unfair competitive advantages for the Swiss economy.
Between 2007 and 2020, the balance sheet of the Swiss National Bank grew significantly, from 21% of GDP to almost 145% of GDP, mainly through purchases of foreign assets, making it one of the largest World central bank balance sheets relative to GDP. At the end of June 2021, Switzerland’s foreign exchange reserves stood at $ 1 trillion, compared to $ 896 billion at the end of June 2020. At the end of June 2021, reserves covered 82% of Switzerland’s short-term debt and 129 % of its GDP.
Switzerland’s $ 1,000 billion in foreign exchange reserves make it the third highest after Japan ($ 1,300 billion) and China ($ 3,200 billion). Almost 8% of total world reserves were held by Switzerland at the end of June 2021.
However, Switzerland is not entirely out of the woods. It joins China, Japan, Korea, Germany, Ireland, Italy, India, Malaysia, Singapore, Thailand and Mexico on a US Treasury watch list.
US Treasury Report
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