European Central Bank Chief Economist Mr Otmar Issing said this morning the ECB is concerned about the euro's high volatility.
Mr Issing said he was reiterating ECB President Mr Jean-Claude Trichet's recent comments about the currency. He noted Mr Trichet had shown "we are not indifferent about the foreign exchange rate but worried over the large volatility".
Mr Trichet has helped cap the euro's surge by saying that the currency's sharp rise, up over 8 per cent against the dollar in the past few months, was unwelcome and "brutal".
European political leaders have made louder complaints that euro strength risks stifling recovery, stoking market expectations that the Group of Seven financial policymakers meeting next month will seek to restore some stability to foreign exchange markets.
Despite concerns the euro strength will hurt growth, Mr Issing said the euro was not to blame for Germany's poor economic performance last year.
The euro zone's largest economy contracted in a full year for the first time in a decade, reporting yesterday that gross domestic product fell 0.1 per cent in 2003 after stagnating the year before. Export growth also fell sharply last year.
On the positive side, Mr Issing said euro strength will offset some of the inflationary impact caused by higher taxes and administered prices that are expected to push up the Harmonised Index of Consumer Prices in the first quarter of this year.