Europeans urge action on dollar
Worried euro zone policymakers pressured Washington yesterday to do more to halt the dollar's decline, a day after the US currency hit a record low against Europe's single currency.
Guy Quaden, Belgium's representative at the European Central Bank, said in an interview on Belgian radio: "Things are becoming exaggerated".
"It's up to the relevant authorities to assume their responsibilities and particularly for US authorities, who repeat that they are in favour of a strong dollar but who should reaffirm their words," he said.
The Europeans are worried that the slide is getting out of hand after the dollar sank below $1.50 per euro last week.
Belgian Finance Minister Didier Reynders, attending a second day of meetings with European colleagues yesterday, put it less bluntly than Quaden but the basic message was the same, that Europe was counting on active US help to tackle an issue which makes life harder for euro zone exporters in world markets.
"We are also happy to see the reaction in the US. They are also concerned about that. So it may be a first step to a good collaboration between Europe and the US in this field," he told reporters.
French Prime Minister Francois Fillon added his voice to the rising chorus of complaint, echoing similar declarations overnight at a Brussels meeting of the euro zone's finance ministers and ECB President Jean-Claude Trichet.
"There is a problem in the relationship between the dollar and the euro," he told French Europe 1 radio, saying exchange rate developments were partly to blame for the rising price of commodities, which from oil to wheat are soaring.
The euro, which bought just a little more than 80 US cents at its weakest back in 2000, hit a record $1.5275 on Monday according to Reuters data.
The euro traded at $1.5214 at 12:26pm local time yesterday in Brussels.
In 2000 the ECB intervened in currency markets to stem the euro's slide, but there has been no public hint that it might do the same now to push the exchange rate in opposite direction.
Breaking with a tradition of not commenting to the media outside formal news conferences, Trichet on Monday stressed that Washington favored a strong dollar.
"In the present circumstances, I consider it very important what has been affirmed and reaffirmed by the US authorities including the Secretary of the Treasury and the President of the United States, according to whom the strong-dollar policy is in the interests of the United States of America," Trichet said.
Washington did not remain silent either. "A strong dollar is in our nation's interest," US Treasury Secretary Henry Paulson said on Monday.
Euro zone officials have been complaining for more than a year about the weakness of other currencies from the dollar to the Japanese yen.
One factor buoying the euro versus the dollar is Europe's relatively better economic situation compared to the US, which many believe is on the brink of recession if not already there.
Another is the refusal of the European Central Bank to reduce interest rates. The US Federal Reserve, by contrast, has cut interest rates 2.25 percent since last September.
Markets expect the ECB to leave rates unchanged at its policy meeting taking place tomorrow.
Agencies
(China Daily 03/05/2008 page16)