European policymakers kept up the pressure on the United States and Asia yesterday for concrete action to bolster the dollar as they head into the Group of Seven meetings next month.
European Central Bank president, Mr Jean-Claude Trichet again said that sharp moves in the euro currency are unwelcome and hurt growth prospects in the 12-nation euro zone.
"We confirm our position expressed when the euro rose sharply that such moves are unwelcome and undesirable for economic growth," he said in an address to the European American Press Club on "The euro - successes and challenges".
This was a repeat of comments Mr Trichet made at his monthly news conference on Thursday, when he acknowledged for the first time recently that the surging euro against the dollar damages growth in the 12-nation euro zone.
One remedy the ECB has long sought is for Asian countries with pegged exchange rates, notably China which has fixed the yuan at about 8.28 against the dollar, to move to more flexible currency regimes.
The euro has borne the brunt of dollar currency weakness due to Asian intervention to weaken their currencies.
Mr Trichet yesterday steered clear of calling directly for greater flexibility in Asian exchange rates, comments that on Thursday had sent the euro tumbling 1 per cent against the yen overnight. He said he did not want to pre-empt the G7 meeting of finance ministers and central bankers in London on February 4th and 5th.
But Mr Trichet stoked speculation that China may be preparing to loosen its fixed exchange rate regime soon by saying that the ECB meets regularly with Chinese monetary authorities and has very good relations with them. Another remedy for dollar weakness is fiscal and monetary action by the United States, European officials said.
Austrian finance minister, Mr Karl-Heinz Grasser called on the US to tackle its massive current account and budget deficits to relieve pressure on the currency.
A new pledge from US Treasury Secretary Mr John Snow to correct the deficits was "extremely important" - especially after new data showed the current account deficit widening. - (Reuters)
