Europe worried about ‘brutal’ currency moves

  • Business
  • Wednesday, 14 Jan 2004

BASEL: Europe is concerned about “brutal” currency movements, said European Central Bank (ECB) chief Jean-Claude Trichet, but a meeting of the world’s top central bankers here did not discuss the US dollar’s rapid slide as a risk to global economic recovery. 

The absence of a common front on currencies from the Group of 10 (G10) meeting suggests the United States is not willing yet to halt the fall of the dollar, which has amounted to 18% against the euro over the past year, analysts say. 

Europeans, though, took a strong line, telling central bankers from the world’s largest industrial nations that they were concerned about sharp foreign exchange moves, while in Paris French Prime Minister Jean-Pierre Raffarin said officials needed to act quickly to bring the euro-dollar into line. 

“There was a mention by Europe that excessive volatility and brutal moves were not welcome and not appropriate,” said Trichet. “We are concerned. We are not indifferent.” 

Bank of Japan (BoJ) governor Toshihiko Fukui said there was “concern but no panic” among policymakers about the dollar. Asked whether he thought its fall against the euro and yen was orderly, he said: “I think it is a little bit too fast.” 

But Trichet, chairman of the meeting, said foreign exchange risks were not part of the G10 discussion at the two-monthly health check on world growth, which the central bankers see as improving steadily. “It was not discussed as a risk,” Trichet said after the talks here on Monday. 

Analysts say this raises questions about whether the Group of Seven (G7) finance ministers can craft a new currency accord at their next meeting early next month in Boca Raton, Florida. 

Europeans are pressing hard and placed the issue firmly on the table at the G10, even toughening their language somewhat from last week. 

France and Germany expressed fears that the soaring single currency would hurt the euro zone’s economic recovery, which depends heavily on competitive exports. 

This hardening by Europe of its stance on the dollar’s dramatic drop took some steam out of the euro’s rally on Monday. The single currency slipped a full cent to US$1.2799 after hitting a new record high against the greenback at US$1.2898 earlier in the day. 

But analysts said the euro’s retreat may be short-lived and only a breather after its heady ascent of more than 12% in the past few months, because the United States seemed unconcerned by rapid currency moves. – Reuters 


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