UPDATE 5-Forex trade emails cast doubt on SNB's Hildebrand
* SNB council forced Hildebrand out over emails to bank adviser
* Ex-boss Roth: Hildebrand "error of judgement" was serious
* Swiss govt expected to confirm Jordan as new SNB boss
* SNB council starts search for new board member
* Upheaval not seen affecting monetary policy
ZURICH, Jan 10 (Reuters) - Switzerland's central bank was seeking a new leader on Tuesday to contain the strength of the country's safe-haven franc after apparently forcing out Chairman Philipp Hildebrand when emails failed to clear him of involvement in a currency trade by his wife.
The supervisory council of the Swiss National Bank made no statement after a six-hour meeting on Tuesday, keeping up suspense on who will now steer the franc through an unprecedented period of strength.
The issue is likely to dominate the Swiss government's weekly meeting on Wednesday, which will be followed by a press conference.
Hildebrand's wife Kashya, a former hedge fund trader who now runs a Zurich art gallery, bought 400,000 Swiss francs ($418,000) worth of dollars on Aug. 15, three weeks before her husband oversaw steps to stem demand for the franc by investors alarmed by the debt crisis in the neighbouring euro zone. She later sold the dollars at a higher rate.
Hildebrand quit his post on Monday, saying he could not provide conclusive evidence that he had been unaware of the trade and that the intense public scrutiny over the affair was compromising his credibility.
Only last week, he resisted calls to step down, saying he only learned of his wife's trade a day after she made it.
Emails between Kashya, Hildebrand and their Sarasin bank client advisor Felix Scheuber, released by the SNB on Monday, showed the central banker had been involved in discussions on a dollar trade but left it unclear whether he had approved it.
After examining the email exchange, the SNB's advisory council indicated to Hildebrand on Saturday that his position was no longer tenable, two Swiss newspapers reported.
One member of the bank council contacted by Reuters who declined to be named did not directly confirm the report but noted that Hildebrand had failed to thank the bank council at his farewell news conference.
In a statement on Monday, the council said it accepted Hildebrand's decision to resign which it said he had taken in order to protect the institution.
Hansueli Raggenbass, the head of the SNB council which was discussing on Tuesday choosing a new member for the three-person policy-setting governing board, declined to comment on the reports as he arrived at the central bank.
But Raggenbass defended his handling of the scandal: "I'm convinced that I've done the job correctly and with engagement".
In a note summarising an Aug. 15 meeting, advisor Scheuber said Hildebrand "would leave it up to his wife Kashya to decide" whether to buy dollars. Scheuber said he made the trade later that day after meeting Kashya at her art gallery office.
In an email from Hildebrand to Scheuber the following day, copied to his wife and the SNB general counsel, he wrote: "We never discussed any dollar purchases yesterday. Given Kashya's email response and copy to me, I assume she gave you the order.
"In future, for compliance reasons, you are not authorised to execute any currency transactions unless the order comes from me or I confirm it," he said, adding "Kashya: sorry about that but currencies really are a special case here."
Scheuber replied: "Yes, Kashya yesterday gave me the verbal order, followed by the email later on. I also remember you saying in our yesterday's conversation that if Kashya wants to increase the USD exposure then it is fine with you."
Jean-Pierre Roth, the former SNB chairman who handed over to Hildebrand two years ago, said his successor should have reversed the trade as soon as he became aware of it.
"He knew that several days later he would change monetary policy which would affect the franc exchange rate," Roth told daily Le Temps. "He made a serious error of judgement unfortunately and today he must pay the consequences.
"In a very difficult economic and monetary environment, the credibility of the SNB has been hurt, the bank is weakened."
David Marsh, co-chairman of the Official Monetary and Financial Institutions Forum, agreed.
"At a time when central banks all over the world have become far more active and much more exposed to publicity as a result of the financial crisis and its aftermath, central bankers have to show almost superhuman probity in all their financial dealings. This, manifestly, Hildebrand did not do," he wrote.
The SNB's supervisory council said on Monday Vice Chairman Thomas Jordan, who joined the SNB in 1997, would take over as chairman for the time being, with the government expected to confirm him soon in the postion permanently.
Jordan, who enjoys a solid reputation, heads the SNB's regulatory department, which is pushing for flagship banks UBS and Credit Suisse to firm up their balance sheets.
Jordan said on Monday he was prepared to take the top job on a permanent basis if the government asked him to do so and stressed his determination to continue to enforce the 1.20 per euro cap on the franc that the SNB imposed on Sept. 6.
The SNB is likely to look for another German speaker to replace Hildebrand on the governing board to complement French-speaking Jean-Pierre Danthine and German-speaking Jordan. Swiss public institutions always seek to balance representatives from the different language groups in this multilingual country.
The three most likely internal candidates are the current deputy members: Thomas Moser, Thomas Wiedmer or Dewet Moser.
Other names mentioned were those of university professor Beatrice Weder di Mauro as well as Aymo Brunetti and Serge Gaillard, both board members of the State Secretariat for Economic Affairs (SECO).
The SNB council said on Saturday it would overhaul its internal rules concerning board members' own trading and examine all transactions they made over the past three years.
The Swiss franc rose slightly on the news of Hildebrand's departure, but the market is not expected to test its cap because of the upheaval.
"The credibility of a central bank does not depend on one person," said Daniel Hartmann of Bantleon Bankan, "Besides, with Thomas Jordan the SNB has an experienced person on the board. The exchange rate will be influenced more by other factors, such as the euro zone crisis."
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