The U.S. Treasury labeled Switzerland and Vietnam as currency manipulators on Wednesday and added three new names to a watch list of countries it suspects of taking measures to devalue their currencies against the dollar.
In what may be one of the final broadsides to international trading partners delivered by the departing administration of U.S. President Donald Trump, the Treasury said that through June 2020 both Switzerland and Vietnam had intervened in currency markets to prevent effective balance of payments adjustments.
Furthermore, in its semi-annual currency manipulation report, the Treasury said Vietnam had acted to gain “unfair competitive advantage in international trade as well.”
Foreign exchange analysts had broadly anticipated the U.S. Treasury designation for the two countries.
The action comes as the global coronavirus pandemic skews trade flows and widens U.S. deficits with trading partners, an irritant to Trump, who won office four years ago partly on a promise to close the U.S. trade gap.
The Swiss National Bank rejected the accusations, saying the label would not deter it from acting aggressively on forex markets.
“The SNB’s monetary policy approach remains unchanged by the report,” the Swiss central bank said in a statement. “In light of the economic situation and the fact that the Swiss franc is still highly valued, the SNB remains willing to intervene more strongly in the foreign exchange market.”
It added that its interventions were not intended to gain unfair trading advantage for Swiss exporters or massage balance of payments figures.
“Foreign exchange market interventions are necessary in Switzerland’s monetary policy to ensure appropriate monetary conditions and therefore price stability,” the SNB said.
The SNB has stepped up interventions this year, spending 90 billion Swiss francs (an equivalent of $101.72 billion) in the first half to rein in the franc, but the central bank has argued this is to prevent the “highly valued” currency from triggering deflation.
Officials from the Swiss government and the SNB are in contact with U.S. counterparts to explain the situation, the SNB added.
The central bank is due to give its latest monetary policy update on Thursday, where it is expected to reiterate its commitment to negative interest rates and currency market interventions.
The Swiss government noted the report, adding that Switzerland did not manipulate the Swiss franc or seek to gain any unfair advantage for its economy.
A spokeswoman for the State Secretariat for International Finance said the country was open to bilateral talks with Washington on the matter.
“Switzerland is confident that the U.S. Treasury will carefully analyse the country’s situation, taking due account of the specific characteristics of Switzerland and the Swiss economy,” she said.
To be labeled a manipulator, countries must at least have a $20 billion-plus bilateral trade surplus with the United States, foreign currency intervention exceeding 2% of gross domestic product and a global current account surplus exceeding 2% of GDP.
The U.S. Treasury also said its “monitoring list” of countries that meet some of the criteria has grown to 10 with the additions of Taiwan, Thailand and India.
Others on the list include China, Japan, Korea, Germany, Italy, Singapore and Malaysia.
The U.S. Treasury report also said that India and Singapore had intervened in the foreign exchange market in a “sustained, asymmetric manner” but did not meet other requirements to warrant designation as manipulators.