ECB concerned about rise in value of the euro

Senior policymakers at the European Central Bank have reportedly expressed concern about the rise of the value of the euro against the dollar, amid fears it could damage the competitiveness of European Union exports.

The Financial Times said several members of the bank's governing council had told it the euro's rise could delay the eurozone's post-COVID-19 economic recovery, and increase pressure on the bank to issue a monetary stimulus.

The newspaper quoted one unnamed member of the bank's council as saying: "In the last few weeks, there has been an appreciation of the euro, which is always worrisome when you have weak demand, especially as the euro area is the most open economy in the world and unusually dependent on global demand."

The council is set to meet next week to discuss the bank's monetary policy and the bank, which is also known as the ECB, could respond by further cutting its inflation forecast, likely to around 1.2 percent.

The FT said the euro was driven higher by the United States Federal Reserve's decision last week to target a lower average rate of inflation.

The source told the paper "the market may interpret interest rates as being structurally higher in the euro area", which could cause the euro to appreciate even more.

The currency rose earlier this week to almost record levels against a trade-weighted basket of currencies, and has gained around 8 percent on other currencies since February.

But the Reuters news agency said a rising euro need not necessarily harm EU exports.

It quoted Isabel Schnabel, an ECB executive board member, as saying a comparatively weaker dollar could boost global trade and that might offset any negative effect on exports caused by a stronger euro.

"At the moment, I am not worrying too much about exchange rate developments," Reuters quoted her as saying.

The agency added on Thursday that investors had been selling euros and buying dollars amid speculation that the ECB could take action to devalue the euro. Reuters said the dollar rose as a result of the speculation, by around 1.3 percent on the 28-month low it hit on Tuesday.

At one point early this week, the euro was worth $1.20 but the Bloomberg news agency reported fears that the ECB would take action cooled that rise and led to it weakening by 0.6 percent on Thursday.

Britain's Daily Express newspaper added that the pound-to-euro exchange rate had soared to a three-month high on Wednesday as the pound also benefitted from talk that the ECB was close to taking action to reduce the euro's value, making the pound comparatively strong as a result.