G7 heading for clash over dollar

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The Independent Online

Europe and the United States look headed for a public clash next month over calls for co-ordinated government intervention to stem the collapse in the dollar.

Europe and the United States look headed for a public clash next month over calls for co-ordinated government intervention to stem the collapse in the dollar.

Central bankers of the world's richest nations said the issue would be top of the agenda at the meeting of the Group of Seven (G7) countries' finance ministers in February.

As the dollar hit a new low to the euro yesterday, France led calls for concerted action to halt the depreciation before it triggered a global currency crisis. Jean-Pierre Raffarin, the French Prime Minister, said instability was not in the interests of Europe or the US. "It can only be addressed properly by a group of societies or states which try to organise things together," he said.

Jean-Claude Trichet, the president of the European Central Bank, said: "There was a mention by Europe that excess volatility and brutal moves were not welcome and not appropriate. We are concerned. We are not indifferent."

However, the US is understood to be content with the fall in the dollar as it boosts exports and curbs imports without the need for trade barriers.

"The topic of foreign exchange and currency adjustment will come up (at the February G7 meeting) but the US seems okay with (a weakening dollar) ahead of the presidential election," a G7 source said.

The comments came as central bankers of the Group of 10 (G10) nations, including Bank of England Governor Mervyn King, met in Basle to discuss the risks to the global economy.

The dollar, which fell to $1.2898 to the euro, has tumbled 20 per cent against the single currency since the previous G7 meeting in September last year. It fell to $1.8577 against sterling, its weakest since late 1992.

Analysts doubted the G7 ­ the US, Britain, Japan, Canada, France, Germany and Italy ­ would be able to agree on co-ordinated intervention but might slow the dollar's fall by sending warning signals to currency traders.

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