Euro volatility hits economy

Sharp swings in the foreign exchange value of the euro are having an impact on the common currency zone economy, European Central Bank Executive Board Member Gertrude Tumpel-Gugerell said on Friday.
"High volatility has an impact on our real economic activity at the moment," Tumpel-Gugerell told a dinner during a conference on Five Years of the Euro at the Dallas Federal Reserve. She did not elaborate.
The ECB became alarmed earlier this year when the soaring euro put pressure on the region's export-led recovery, and the central bank has been a vocal supporter of the last two Group of Seven communiqués warning against excessive currency volatility.
But the euro has retreated 11 cents against the dollar from its peak on the eve of the G7 meeting in Boca Raton, Florida, in February, and Tumpel-Gugerell acknowledged there had been a moderation.
"If you look at it from a long-term perspective, we are not so much away from long-term averages" of the euro on foreign exchange markets, she said.
The euro was launched at a rate of $1.19 in January 1999.
ECB President Jean-Claude Trichet told reporters earlier on Friday that the G7's currency comments still stood.
"On the present exchange rates I will only say that the appropriate terms of reference are in the two last communiqués of the G7, in Boca Raton and Washington," Trichet said after delivering a speech in Schierensee, Germany.
The communiqués warned against excessive currency volatility and called on greater currency flexibility from Asian countries.
Tumpel-Gugerell also said the bank had achieved its aim of price stability, which it defines as less than but close to 2 percent over the medium term, and was also doing its best to help growth.
"Monetary policy has achieved its goal to maintain price stability and is working well to provide full support to promote higher sustained growth rates and economic stability," she said in the text of a speech released after her address.
Consumer prices have in fact risen recently in the 12-nation currency bloc, hitting 2 percent year-on-year in April according to preliminary estimates, compared with 1.7 percent the previous month.
Economists fear that surging energy costs are fuelling inflation after oil hit a 21-year high.