By Catherine Bosley and Caroline Copley

ZURICH (Reuters) - Switzerland's embattled top central banker vowed to fight "with all means" accusations of wrongdoing centered on a currency trade made by his wife three weeks before he imposed a cap on the soaring Swiss franc.

Swiss National Bank (SNB) Chairman Philipp Hildebrand told a Swiss news conference he had no plans to quit after an employee of the bank used by his family leaked bank account details to the lawyer of a political adversary.

"As long as I have the confidence of the government and the bank council, stepping down is not an issue for me," Hildebrand told a packed news conference in Zurich.

"Looking back, I made mistakes, but I always acted in line with the rules, and I can look at myself in the mirror," said Hildebrand.

He conceded he had not been "totally surprised" when he saw his wife had spent 400,000 Swiss francs ($423,800) on buying dollars last August.

"She repeatedly talked about how low the dollar is and that we probably should buy more ... Either I should have reversed the transaction or even told her not to discuss this."

FURORE

The furor now threatens to tarnish the image of the SNB, whose credibility is key to its ability to curb the strength of the franc and stop it harming exporters and triggering deflation.

The Swiss cabinet has said it has full confidence in Hildebrand, a suave 48-year-old former hedge fund manager turned architect of tough global banking regulations and vice chairman of the Financial Stability Board international supervisory body.

But critics of the Hildebrand couple, who both bought dollars last year, and of the central bank, which initially declined to divulge staff ethic codes and details of internal investigations in the episode, sharpened their swords.

A cartoon on the front page of the daily Tages-Anzeiger showed Hildebrand set ablaze, laboriously reading the instructions on a fire extinguisher marked "transparency."

"A man who used his bank account for private forex deals worth several hundred thousand francs is simply in the wrong place heading the central bank," the deputy editor of the Berner Zeitung said in an editorial. "Hildebrand must vacate his post."

"I think Hildebrand has lost credibility over this issue, and he will have to go, if not now then further down the line," agreed Michael Hewson, an analyst at CMC Markets in London.

PLAYING WITH FIRE

His wife Kashya, a former hedge fund trader who now runs a Zurich art gallery, bought "ridiculously cheap" dollars on August 15, three weeks before her husband oversaw steps to cap the rise of the franc.

Switzerland guards bank client confidentiality jealously -- to the extent that its banks are plagued by scandals over their role in tax avoidance schemes for the world's wealthy -- so the Bank Sarasin employee who leaked Kashya's trade was also in the firing line.

The state prosecutor of the canton of Zurich said on Thursday it was starting an investigation into a 39-year-old man

for breaking the law and publishing bank data about the Swiss central banker.

The man, who worked in the IT department, gave the data to a lawyer close to Hildebrand's sharpest critic, Christoph Blocher, a leading member of the Swiss People's Party (SVP), before handing himself to the police.

The bank data was seized on by the SVP, a vocal critic of the central banker and the SNB's interventions in foreign exchange markets on his watch.

"The person who steers the course of our currency, who determines the value of our francs, who determines the value of our wealth, cannot be allowed to conduct foreign exchange business," SVP parliamentarian Christoph Moergeli told Reuters.

TRANSPARENCY

The central bank itself has also come under mounting criticism for failing to publish its internal ethics codes, unlike other central banks, and Wednesday bowed to pressure to release staff guidelines as well as a report it had already commissioned into the affair.

Auditor PricewaterhouseCoopers (PwC) concluded internal rules had not been broken, saying Hildebrand had not known in advance about his wife's dealings last August and that there had therefore been no misuse of privileged information.

Hildebrand, whose salary of around 860,000 Swiss francs makes him the world's highest paid major central banker, also bought dollars worth $1.2 million in March 2011 after selling real estate in Switzerland, according to PwC.

The Hildebrand couple then sold $516,000 on October 4 for 475,000 francs to fund the purchase of another property in Switzerland. But the trades did not breach internal ethics rules, which forbid currency trades within a six-month period.

Weekly magazine Weltwoche, however, which has links to the SVP, alleged the central banker had personally gained from currency trades before the cap was imposed.

"I understand that some of the transactions now discussed and the way in which they have been portrayed and interpreted in the media and in public could bring my integrity into doubt," said Hildebrand.

"The most important lesson which I can take from these events is that it is essential (we have) further improvement in transparency in every aspect that concerns financial transactions of members of the board of the Swiss National Bank."

SNB's credibility is crucial to its ability to keep the cap of 1.20 francs per euro in place without being forced to spend billions defending it from those seeking a safe haven from the euro-zone debt crisis.

Analysts have said any resignation by Hildebrand could trigger a Swiss franc sell-off, though it would probably be shortlived.

"That doesn't mean to say that a resignation would be disregarded by the market," said Neil Mellor, currency strategist, Bank of New York Mellon.

"It's entirely plausible that the market may sell the Swiss franc on the back of it, but I suspect people would use any sell-off to buy back in, because there are bigger fish to fry, not least the fact that the Swiss franc is set to remain a safe haven through 2012."

($1 = 0.9439 Swiss francs)

(Additional reporting by Katie Reid in Zurich, Naomi Tajitsu and Neal Armstrong in London; Writing by Kirstin Ridley; Editing by Will Waterman)