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ECB chief may fail to stem euro's "brutal" gain
 European Central Bank (ECB) President Jean-Claude Trichet, whose warning against "brutal" currency shifts helped push the euro down from a record in January, may fail to halt its rally this time without support from the United States. The euro rose to a record of US$1.3074 on November 18, threatening to stifle a recovery in the 12 nations sharing the currency, even after Trichet repeated his "brutal" comment 10 days earlier. US Treasury Secretary John Snow said in London last week that exchange rates are best set by markets. "There's very little they can do," said Thomas Mayer, chief European economist at Deutsche Bank AG in London. "They can try intervention but I would seriously doubt if it could work. Cutting interest rates is tricky because they seem to be thinking more about the upside risks to inflation."Snow and other finance ministers from the Group of 20 industrial and emerging economies meeting in Berlin at the weekend omitted the dollar's drop from their joint closing statement. The US rejected German efforts to insert a sentence criticizing "volatile" currency moves, said two German governing officials, who declined to be identified. "The US not only doesn't have a case to intervene but is rather happy with the dollar's downtrend," said Ian Stewart, chief European economist at Merrill Lynch & Co in London. Trichet is presiding over an economy that grew at its slowest pace in more than a year in the third quarter, expanding just 0.3 per cent from the previous three months. In the United States, growth accelerated. German Chancellor Gerhard Schroeder on November 20 described the stronger euro as "worrying." The euro's 7 per cent rally against the dollar in the past two months risks curbing demand at exporters such as Siemens AG, Germany's biggest engineering company, by making their products more expensive abroad. Exports account for one-fifth of the euro region's economy, twice as much as the United States. Posted by: tipper 2004-11-24 |
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