Euro hits $1.40 as ECB holds rate
Published 08/10/2010 | 05:00
THE euro hit $1.40 for the first time since February yesterday as European Central Bank president Jean-Claude Trichet indicated that the ECB did not favour artificial increases to the money supply.
As expected, the ECB left its benchmark interest rate at a record low of 1pc.
The euro has gained 10pc against the dollar this month, partially because of worries about the US economy and also due to the ECB's isolation in not wanting to 'print' money by directly buying government debt.
The Bank of Japan this week dropped its benchmark rate to 'virtually zero' and expanded its asset-purchase programme.
Meanwhile, the US Federal Reserve has indicated that it may adopt similar policies.
The Bank of England, which kept its rates at half a per cent, is split on whether more 'quantitative easing' by buying assets should be introduced.
Mr Trichet said: "More than ever, exchange rates should reflect economic fundamentals." He complained of "disorderly" movements in exchange rates.
Mr Trichet's comment was "the mildest of rebukes," Ken Wattret, an economist at BNP Paribas in London told Bloomberg.
"We continue to view the contrast between the debate inside the European Central Bank over what to do next and that within the Fed and other central banks as a green light for the euro to stay stronger for longer than the fundamentals suggest it ought to."
Figures yesterday showed that German industrial production rose more than three times as much as economists forecast in August, while UK manufacturing also beat expectations.