The euro's current level is close to an "equilibrium" value and its decline to the lowest level in four years against the dollar may help Europe's exports, the International Monetary Fund said today.
"The current level of the euro does not appear to pose problems," IMF First Deputy Director John Lipsky said in an interview in Tokyo today. "The euro is rather close to what we would consider equilibrium value after an extended period at which it traded above that value."
Mr Lipsky's comments indicate little threat to the euro- region's economy from the currency's 18 per cent slump in the past six months.
Spain's deputy finance minister Jose Manuel Campa said today that the decline will "probably" have a positive impact on his nation's economy, while causing energy costs to increase.
"It's perhaps easy to forget the euro, when it was created, debuted at a value of $1.17," Mr Lipsky said. The currency is "not so far away from where it started," he added.
The currency shared by 16 European Union countries has tumbled in five of the past six weeks
on concern the region is failing to contain a debt crisis that began in Greece. It traded at $1.2184 at 10.57am in London, down 24 per cent from the record high it reached in July 2008.
The EU set the initial exchange rate for the euro at $1.16675.
The currency fell today after Germany banned speculators from some bets against government bonds and banks. The euro's existence is at risk and the EU may be facing its greatest challenge with "incalculable" consequences if leaders fail to act, German chancellor Angela Merkel told lawmakers in Berlin today.
Mr Lipsky declined to comment directly on the ban by Germany's financial regulator, while saying that "placing barriers to market participation should be done with great caution".
The IMF official, a former chief economist at JPMorgan Chase and Co, also said that the European Central Bank's decision last week to start buying government bonds was "highly timely" and that the purchases should be temporary.
Bloomberg