Is this part of a larger trade agreement between Switzerland and the U.S.?

On Monday, the FDF and the SNB announced that, together with the U.S. Treasury, they had adopted a joint declaration on macroeconomic and exchange rate-related issues. According to a press release from the Swiss side, the declaration is not legally binding and merely confirms existing practice.

No Unfair Competitive Advantages via Exchange Rates

In the declaration, Switzerland and the U.S. commit not to manipulate exchange rates for competitive purposes, thereby affirming the principles of the IMF and the G20 on currency practices. In particular, both countries pledge not to use exchange rates or the international monetary system to prevent effective balance of payments adjustments or to obtain unfair competitive advantages.

The SNB emphasizes that its monetary policy remains focused on maintaining appropriate monetary conditions to ensure price stability, and that it does not target exchange rates in order to provide competitive advantages to the Swiss economy. Both countries also agree that foreign exchange interventions are legitimate instruments to counter excessive volatility or disorderly depreciation or appreciation.

Beyond FX Interventions

There is also consensus that macroprudential measures, which are by definition intended to strengthen financial system stability, and measures related to capital flows should not aim at influencing exchange rates for competitive reasons. Furthermore, federal institutions should not invest abroad with this motive.

Both countries reaffirm their commitment to publishing relevant statistics:

• All foreign exchange interventions will be disclosed at least quarterly.
• Data on foreign exchange reserves, including forward positions, will be published monthly in accordance with the IMF's data template on international reserves and foreign currency liquidity.
• The currency composition of reserves will be disclosed quarterly.

On the Watchlist of Currency Manipulators

In its press release, the Swiss side stressed that, regardless of the declaration, the SNB and FDF have been engaged in dialogue with the U.S. Treasury on macroeconomic and financial policy issues since 2022.

Switzerland has repeatedly appeared on the U.S. list of potential currency manipulators due to the SNB’s large-scale currency purchases and the country’s significant trade surplus.

Tactical Concession to the U.S.?

At the press conference on the latest interest rate decision, SNB President Martin Schlegel reiterated that Switzerland has been in close contact with the U.S. Treasury and the Federal Reserve for years. However, the SNB would not allow its monetary policy to be restricted and would intervene in currency markets if such measures were deemed the best instrument in a given situation.

The extraordinary statement does not appear to entail any additional commitments for Switzerland. However, it could be presented by the U.S. as a visible concession wrested from the small state.