Almunia Says Excess Euro Volatility Not Welcome
The euro's exchange rate is shaped by the market but excessive volatility is unwelcome, EU Economic and Monetary Affairs Commissioner Joaquin Almunia said on Wednesday as the euro hit record highs against the dollar.
The euro traded at $1.5043/44 at 1212 GMT, having broken above the psychological $1.50 level late on Tuesday on market expectations of more interest rate cuts in the United States due to the growing risk of a recession there.
"The rate of the euro is a product of supply and demand forces. As you know very well, excessive volatility in evolution in exchange rates is unwelcome," Almunia told a news conference in response to a comment on the euro's strength.
European companies had been complaining about the sharp rise of the euro already when the unit passed $1.40, saying it was making euro zone exports less competitive.
But world financial leaders from the Group of Seven industrial nations could not agree to address directly the euro's rise at their meeting in February, focusing instead on a need for faster appreciation of the Chinese yuan currency.
Asked whether he was worried that investment in Europe by sovereign wealth funds would further boost the single currency, now used by 15 countries, Almunia said: "I am not worried at all. All investors under principles generally accepted that we have introduced in these communications ... are extremely welcome."
He also said the euro's strength as well as sound macroeconomic fundamentals were helping the European Union economy weather financial market turmoil, caused by the subprime mortgage market crisis in the United States.