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Switzerland is not manipulating its currency: Official

Switzerland is not manipulating its currency, Jorg Gasser, the country's state secretary for international financial matters, told CNBC's "Street Signs" on Tuesday.

That followed Switzerland being named last week as one of six countries on the "monitoring list" in the U.S. Treasury's semi-annual currency report on potential foreign-exchange manipulators.

Switzerland met two of the three criteria to be named a manipulator, both in the most recent report and the previous one in October: It runs a material current account surplus and it engages in persistent, one-sided intervention in foreign exchange markets.

It did not meet the third criterion of running a bilateral trade surplus with the U.S. of at least $20 billion.

The U.S. Treasury estimated that Switzerland's central bank purchased a net $66 billion of foreign exchange in euros in 2016, with $20 billion purchased in June after the U.K. referendum to exit the eurozone.

Gasser noted that Switzerland had discussed the matter with the previous U.S. administration for "quite some years."

But he added, "There are some good explanations for that. Switzerland is not manipulating its own currency. It's simply that the Swiss franc is grossly overvalued." He noted that the Swiss franc has risen around 40 percent since the global financial crisis.

"It is understandable that we have to do something about it," Gasser said. "They have to keep the Swiss franc on a level that is possible for the Swiss economy to work."

A Swiss franc and euro banknotes
Dado Ruvic | Reuters
A Swiss franc and euro banknotes

Gasser noted that the franc still faced upward pressure, particularly amid uncertainty over Brexit and other geopolitical developments.

"Switzerland, or the Swiss currency, has always been a safe haven, in difficult times," he said. "It's not so much about a strong Swiss franc. It's rather about a very weak euro. And as you know, monetary policy is made in Frankfurt and not in Zurich, so there is very little influence that we can have on the euro."

The European Central Bank (ECB), faced with a sluggish regional economy and moribund inflation, has kept an accommodative policy for years. Under its quantitative easing program, the central bank has planned to buy 60 billion euros of bonds every month this year.

To be sure, even the Treasury report pointed to an International Monetary Fund finding that the franc was overvalued.

But the report added that Switzerland could use fiscal policy "more forcefully" and use more traditional monetary policy tools, such as interest rates, to combat deflationary pressure and reduce foreign-exchange intervention. The Swiss National Bank has a deposit interest rate of negative 0.75 percent in an effort to discourage inflows into the country's currency by making assets there unattractive.

In 2015, the central bank scrapped the Swiss franc's three-year peg of 1.20 francs to the euro, spurring an as much as 30 percent rise in the currency's value against the single currency. That came as the ECB was preparing to introduce a quantitative easing policy, which would weaken the euro and make maintaining the peg more costly.

At the beginning of 2008, the euro was fetching as much as 1.6554 francs, and then fell as low as under 0.98 franc in 2015, when the peg was removed. On Tuesday, the euro was fetching around 1.0681 francs.

—By CNBC.Com's Leslie Shaffer; Follow her on Twitter @LeslieShaffer1

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