25 March - The ECB's view on the dollar exchange rate:
(in consideration of euro weakness as a negative for gold)
"The euro, the dollar and national economic policies:
what room for manoeuvre?
Speech by Dr. Willem F. Duisenberg,
President of the European Central Bank,
at the Euro, J+80 conference on 25 March 1999 in Paris
The ECB's view on the dollar exchange rate
Let me now share with you our views on the exchange rate of the euro against the dollar. The weakening of the euro vis-à-vis the dollar during January and February was mainly attributable to a series of economic data releases over this period, which were mostly relatively favourable as far as the US economy was concerned. The US economy surprised commentators with very positive data on employment and output. Over the same period data releases for the euro area were more muted.
It appears, therefore, that the recent developments of the euro exchange rate primarily reflect the previously unexpected strength of the US economy.
Therefore, the recent fluctuations of the euro exchange rate should not be considered overly dramatic. The exchange rate of the euro against the dollar is now comparable with the level at which the so-called synthetic euro was quoted against the dollar prior to September 1998. Moreover, long-term government bond yields of euro area Member States continue to be lower than in the United States, also suggesting that investors believe in the stability of the euro.
The current euro exchange rate, therefore, does not hint at a misalignment or at a structural weakness of the euro. Moreover, there is no indication that financial markets doubt the credibility of the monetary policy of the Eurosystem. Nevertheless, we should keep in mind that the credibility of a currency is a precious but likewise fragile asset. The possibility cannot be excluded that increased uncertainty about the political support for a stability-oriented monetary and fiscal policy has contributed to the weakening of the euro. Through pursuing a stability-oriented monetary policy, the Eurosystem underscores the confidence that the world has in this young currency, the euro."
(full speech at ecb.int |
