'We do not want to see a falling dollar,' said Hans Tietmeyer, the president of the Bundesbank, after the central council's traditional annual meeting outside Frankfurt, which took place in Potsdam.
The comments came during a relatively stable day for the dollar, although it slipped in US trading on fears that the Bundesbank would not join any international support operation for it. In Europe the US currency closed at DM1.6025 and Y101.11.
Bond markets were also stable, little affected by figures showing a 0.9 per cent rise in US durable goods orders in May.
Gilts were helped by a slowdown in the annual rate of growth of banknotes in circulation in Britain from 6.4 per cent to 6.1 per cent last week. The FT-SE index of 100 leaing London shares fell by 18 points to 2,942.4.
Clearly alarmed by the persistence of inflation pessimism, Mr Tietmeyer adopted unusually categorical tones for the Bundesbank, declaring 'There are no worries in Germany today about inflationary expectations.'
He also used the opportunity to lend support to Alan Greenspan, chairman of the US Federal Reserve, saying: 'I have no doubt his judgement is correct, that the current inflation fears in US financial markets are exaggerated.'
Despite dismissing domestic inflation concerns, the Bundesbank left Germany's key interest rates unchanged, the discount rate at 4.5 per cent and the Lombard emergency lending rate at 6 per cent.Reuse content