ECB bezorgd over hoge eurokoers (en)

The President of the European Central Bank Jean Claude Trichet has for the first time expressed deep concern about the rapid rise of the euro against the dollar, increasing speculation as to whether the ECB might intervene in the foreign exchange markets.

Speaking after a meeting of central bankers from the developed G10 countries in Basel, Mr Trichet said that the excessive volatility in the exchange rate is "not welcome and not appropriate", describing the Dollar's decline as "brutal".

The strengthening of the euro against the dollar risks hampering euro zone growth and is increasing pressure in the ECB to cut interest rates.

Mr Trichet's remarks, which are very strong compared to his previous more cautious comments, come after the euro was trading at 1.29 dollars in early morning trading yesterday.

Concern was also expressed by French Premier Jean-Pierre Raffarin yesterday morning: "We must together, quickly, find the ways to ensure parities that are more compatible with economic reality".

These comments, however, had an effect as they led the euro to slip back.

The weakening of the dollar is not only having an affect on the euro but also on the Japanese yen.

The dollar has decreased by 25 per cent against the euro and 10 per cent against the yen over the last year.

While making European and Japanese goods more expensive in the market, it puts US domestic exports in a favourable position.