Switzerland risks the ire of the White House as it flags potential currency intervention

Swiss officials say the Iran war is making them more willing to intervene against any significant appreciation in the country’s currency, but doing so risks another dispute with the White House.

The Swiss National Bank announced on Thursday that, as expected, it was holding its key interest rate at 0%. But its policymakers said: “Given the conflict in the Middle East, the SNB’s willingness to intervene in the foreign exchange market has increased.”

“The SNB thereby counters a rapid and excessive appreciation of the Swiss franc, which would jeopardize price stability in Switzerland,” they added.

The Swiss franc, widely considered a safe-haven asset, has been boosted by broader market volatility. Turbulence and uncertainty last year saw the franc rise against the U.S. dollar, and strengthen against regional peers, the euro and the British pound.

A strong franc puts deflationary pressure on the Swiss economy, which briefly tipped into disinflation territory last year, and threatens the country’s exports.

With Switzerland’s annual inflation rate at just 0.1%, any rate cut in an attempt to cool the franc would reinstate the unpopular negative rates that ran for seven years until 2022.

Alternatively, policymakers can sell Swiss francs and buy foreign currency — typically euros, but sometimes dollars — in efforts to move the price.

But, under President Donald Trump, the U.S. has aggressively attacked the SNB’s currency intervention strategy.