Arab Today, arab today french pm calls for eurozone exchange rate policy
Last Updated : GMT 23:12:04
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French PM calls for eurozone exchange rate policy

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Arab Today, arab today French PM calls for eurozone exchange rate policy

French Prime Minister Manuel Valls
Paris - AFP

France's Socialist Prime Minister Manuel Valls called Wednesday for a "European exchange rate policy" as the euro shot up further on shifting monetary policy expectations.

"The eurozone can not be the adjustment variable in exchange policies of other large monetary zones," Valls told a cabinet meeting.

The policy should "respect, of course, the independence of the European Central Bank," he added.

Nations targeting exchange rates is a sensitive subject, with developing countries having accused advanced countries of waging "currency wars" in recent years as they sought to stimulate their economies with interest rate cuts or massive quantitive easing (QE) programmes.

Such measures often significantly impact foreign exchange markets -- intentionally or not.

Exchange rates have whiplashed in recent months as the ECB launched its QE programme while the US Federal Reserve considers raising interest rates after having kept them at near zero for years and having run its own QE programmes.
The euro slid from around $1.25 in mid-December to just under $1.05 in March, but it leapt back above $1.13 on Wednesday as investors speculate the ECB may terminate QE sooner than expected amid modest rises in inflation and growth levels and worries the US Fed may push back interest rate hikes as the US economy nearly stalled in the first quarter of the year.

Fluctuations in exchange markets can have significant consequences for wider economic activity.

The slide of one country's currency makes its products cheaper for export, an increase in trade that stokes growth. But that has the inverse affects for nations whose money is appreciating by comparison.

For those reasons, any signs of governments influencing rates for economic gain tends to draw protest from others, even though the current era of tight budgetary restrictions makes using monetary methods to nurture growth a more frequent occurrence.

The stronger dollar is viewed as a factor behind the US economy slowing to 0.2 percent growth in the first quarter, while the weak euro has helped the eurozone perk up.

Eurozone growth figures are due out next week.

 

 

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