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As the dollar hit new lows against the Euro on Monday, the European Central Bank signaled that the recent shift in exchange rates between the two currencies was not a cause for concern in Europe.
As the euro rocketed to the highest it has ever been against the US dollar, $1.3846, many European analysts expressed fears that the weakness of the dollar could have a negative affect on European economic growth.
However, the ECB quickly moved to allay these fears on Monday as European Central Bank Executive Board Member Lorenzo Bini Smaghi said there was no need for concern.
"The weakness of the dollar reflects the weakness of the American economy," he said.
He added that, in turn, the strength of the euro was indication that the euro-zone economy is currently healthy and in a strong position.
The European Central Bank is currently concerned with rising inflation rates with a further increase in interest rates expected by many in September. This would add to 1 percent rise in rates since August of last year.
Annual inflation for the 13 euro currency countries remained at 1.9 percent in June, for the fourth month in a row. This is in line with the ECB’s preferred annual rate of about 2 percent.
15:13
Posted on Jul-30-2007
