European Central Bank President Jean-Claude Trichet said today that 'brutal' exchange rate moves were never good for the world economy, as the dollar teetered close to all-time lows against the euro again.
'I have said already, brutal moves are never welcome,' Trichet told a news conference after the ECB left interest rates on hold at 4% for the fifth month running.
The euro has hit record highs against the dollar and major trading currencies as traders exploit the narrowing interest rate gap with the US and concerns about US growth in the wake of the subprime mortgage crisis.
In January 2004, Trichet used the word 'brutal' to describe a sharp rise in the euro, then at record highs of $1.2898.
The ECB chief said today that he had seen 'sharp and abrupt' moves in exchange rates, adding that the Group of Seven finance ministers' position on the undesirability of disorderly movements was true more than ever.
He also emphasised the US government's stated position that it is in favour of a strong dollar.
The ECB last intervened on currency markets in late 2000, to support the then weak euro.
Trichet also said today that there were continued inflationary risks in the 13-nation euro zone but hinted there would be no interest rate hike next month.
'The outlook for price stability over the medium term is subject to upside risks,' he said.
But he added that 'the economic fundamentals of the euro area remain sound and support a favourable medium-term outlook for economic activity.'
And, in what was seen as a hint that the bank would probably not hike the rate next month either, Trichet did not say the ECB was exercising 'strong vigilance' over inflation, which he has said in the past to signal an imminent hike.
The ECB also left its marginal lending rate, at which banks can get emergency overnight loans, unchanged at 5% and the deposit rate stayed at 3%.
Earlier, the Bank of England kept its key interest rate at 5.75% for a fourth month running, as expected, as policymakers sat tight amid rising concerns over the global credit squeeze.
