ECB stresses foreign exchange stability after holding rates

European Central Bank chief Jean-Claude Trichet said on Thursday the bank was worried about excessive moves in foreign exchange rates but would not be drawn on what Group of Seven policymakers might say on the matter.
Trichet told a news conference after the ECB left eurozone interest rates unchanged at 2.0 percent that the bank's monetary policy remained appropriate.
He said the central bank had highlighted the need for stability in currency rates. "With regards to exchange rates we again particularly stress stability and express concern about exaggerated exchange rate movements," Trichet said.
Markets are on tenterhooks about what G7 finance ministers and central bank governors, who meet in Florida on Friday and Saturday, will say about global currencies after a slide in the dollar has seen the euro rise as much as 40 percent in the past two years.
Trichet, due to attend the meeting, declined to comment on what the G7 might say in its communiqué.
"It is not my tradition to announce in advance anything as regards the G7," he said. "We will have the usual and customary press encounter to explain the communiqué."
Eurozone policymakers worry that euro strength could derail export-led economic recovery. The US administration, on the other hand, has so far seemed content to see the dollar weaken as it boosts growth, not least in a presidential election year.
A Reuters survey this week showed few currency strategists expect the G7 to say anything that might halt the dollar's two-year decline or help Japanese or eurozone exporters, who are struggling to keep their prices competitive.
The ECB joined a round of verbal intervention from European policymakers to talk the euro down last month, stopping its rise against the dollar at record highs just under $1.29.
Most analysts expect the ECB to keep its rates on hold until well into this year, possibly into 2005.
Trichet said there was no fundamental change to the outlook for stable prices and that inflation would drop below two percent this year and stay at that level. "On the whole inflationary pressure remains limited," Trichet said.