Tags: ECB | Trichet | dollar

Europe Calls for Strong Dollar, Asian Currencies

Monday, 07 Dec 2009 03:55 PM

European Central Bank President Jean-Claude Trichet called again Monday for a strong dollar and a higher value for Asian currencies, days after the euro hit a year-high against the dollar.

The 16 nations that use the euro believe their currency is overvalued, the head of a eurozone finance ministers' group said last week.

The strong euro has hiked the price of eurozone goods for buyers in major export markets in Britain and the United States as well as emerging markets in Asia, undermining trade as a driver for feeble economic growth in European nations.

On Dec. 3, the euro rose to $1.5120, the highest level against the dollar since August 2008. Expectations of higher U.S. interest rates propelled the dollar on Monday, pushing the euro below $1.48 for the first time since Nov. 20.

Trichet told the European Parliament's economy committee that a strong dollar was "very important for the stability and prosperity of the global economy" and was crucial for both the United States and its partners.

He repeated a call for Asian currencies whose value is determined by the government — a reference to China — to allow "a gradual, progressive and orderly appreciation" of the renminbi and others to help the global economy.

Chinese officials shrugged off a eurozone demand that its currency rise against euro at talks two weeks ago. A stronger yuan would allow Chinese customers buy more foreign goods but could limit the country's position as one of the world's biggest exporters.

Within the 27-nation European Union, Trichet said it was important that no country claim that it was happy for its currency to be "as weak as possible" and that he was "sure that no country is trying to get an advantage" and kickstart its economy by devaluing its currency.

The euro has also strengthened against other EU currencies such as the British pound, the Swedish krona and the Polish zloty since the beginning of the year.

Trichet said he expected a moderate recovery in the euro area in 2010, with subdued economic output and trade dampening business demand for credit in coming months. He said he saw no signs of a credit crunch in the euro area and that financing conditions were improving.

The ECB kept the eurozone's key interest rate on hold at a record low of 1 percent last week and announced it would start to phase out liquidity support to banks, the first step in withdrawing the support the central bank has provided banks since the financial crisis started.

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European Central Bank President Jean-Claude Trichet called again Monday for a strong dollar and a higher value for Asian currencies, days after the euro hit a year-high against the dollar.The 16 nations that use the euro believe their currency is overvalued, the head of a...
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