Euro zone politicians and central bankers further underlined their worries about the euro's rise on Wednesday as debate heated up on whether top world finance ministers should discuss exchange rates at a key meeting.
Bank of France Governor Christian Noyer warned against excessive forex volatility while French, Italian and German ministers said they were worried about the impact on their exporters of a dramatic fall in the value of the dollar.
The comments contrasted with the relaxed tone of US Federal Reserve Chairman Alan Greenspan in Berlin on Tuesday where he said the dollar's decline had yet to cause inflation or deter foreign capital inflow to the United States.
Foreign exchange markets see a transatlantic struggle developing over whether a Group of Seven major developed countries meeting in Boca Raton, Florida next month should try to influence exchange rate movements.
"There seems to be a little tug of war going on in the run- up to the February 6-7 G7 meeting," said Toru Umemoto, currency strategist at Morgan Stanley in Tokyo.
As the struggling dollar pulled further off this week's record low versus the single currency, Noyer said that while the situation should be kept in context, sudden exchange rate moves were harmful.
French Trade Minister Francois Loos said in a press interview published on Wednesday that French firms had been forced to slash margins to remain competitive in dollar terms. "It is obvious that this situation cannot last for ever," he said.
French Prime Minister Jean-Pierre Raffarin told a conference in Brussels late on Tuesday the current euro/dollar rate did not best reflect the economic situation of the euro zone and United States.
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