USD/CHF Tests 0.92 As UBS Warns US Will Label SNB a Currency Manipulator

The Swiss franc is extending its gains against many of its G10 currency competitors to finish the trading week. With the US dollar weakening and global economic uncertainty amid the coronavirus pandemic, investors continue to pour into the franc, much to the chagrin of a central bank doing everything it can to place a cap on its ascent.

As the Swiss National Bank (SNB) defends its aggressive foreign exchange interventions to limit the currency’s appreciation, one financial institution is sounding the alarm that Switzerland could soon be labeled a currency manipulator by the Treasury Department.
UBS Group AG analysts warned that Switzerland will likely soon get named as a currency manipulator by the US government. In a research note to clients, UBS noted that Bern meets all three criteria to receive such designation from Washington: a high trade and current account surplus, as well as large-scale forex interventions. The nation was added to a monitoring list in January 2019, and Switzerland could soon be upgraded when the Treasury releases its next report later this year.
Economist Alessandro Bee explained that the Swiss government would need to use its diplomatic skills and depend on the goodwill of the US to avoid being added to the list. Bee further noted that the latest developments could produce uncertainty surrounding the central bank’s future monetary policy and â€œincrease volatility” in the exchange rate.
But the SNB has signaled that it is not too concerned about the possibility, defending its actions as necessary to fight deflation and help the economy.
Earlier this week, the SNB announced that it would modify the special rate on its liquidity-shortage financing facility and perform additional open market repo operations to ensure sufficient monetary market liquidity. Central bank authorities said in a statement:

As before, the special rate will be calculated as the SNB policy rate plus a surcharge of 50 basis points. However, the lower limit for the special rate is to be reduced to at least 0%, down from the current level of at least 0.5%.

On the data front, the Federal Customs Administration (FCA) reported that its trade surplus edged up to $2.8 billion in June, up from $2.7 billion in the previous month. Imports surged 7.3%, thanks to an increase in purchases of machines and electronics, automobiles, and metals. Exports rose 6.9% due to greater shipments of chemical and pharmaceutical products, metals, and watches.
The USD/CHF currency pair tumbled 0.31% to 0.9227, from an opening of 0.9253, at 16:36 GMT on Friday. The EUR/CHF was unchanged at 1.0734.
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