Sir Edward seeks to calm currency nerves

The world's leading central bankers attempted yesterday to calm mounting fears over the slump in the dollar as it hit its lowest level against the euro since the single currency was launched four years ago.

The world's leading central bankers attempted yesterday to calm mounting fears over the slump in the dollar as it hit its lowest level against the euro since the single currency was launched four years ago.

Sir Edward George, the Governor of the Bank of England, said the 10 per cent surge in the value of the euro this year was a "recovery from weakness". He was speaking after a meeting of central bankers from the Group of 10 (G10) rich nations that includes the US, the UK, France, Germany and Japan. "The sense was in the case of the euro it was a recovery from weakness rather than remarkable strength," he said.

His comments came as the dollar hit $1.16 against the euro for the first time in more than four years after John Snow, the US Treasury Secretary, said the fall had boosted the nation's exports. It tumbled more than a cent, weakening as far as $1.1624 from $1.1487 late on Friday, close to the euro's $1.16675 starting rate in January 1999. Sterling also fell against the euro, touching fresh lows of 72.13p. The pound was up near three-month highs against the dollar at $1.6107.

Mr Snow's remarks were echoed yesterday by Kathleen Cooper, the Under-Secretary of Commerce for Economic Affairs, who said the dollar's 21 per cent drop over the past year had given exporters "somewhat more pricing power". Both continued to stress the US's commitment to a strong dollar policy.

The rise in the euro poses a threat to the weak eurozone economy in the form of falling exports and rising import prices. The G10 bankers expect growth in the eurozone of less than 1 per cent this year, recovering to 2 to 2.5 per cent in 2004. They saw economic growth in the US reaching 3 per cent or more this year and continuing at trend over the next couple of years, Sir Edward said.

He said: "The uncertainties associated with the Iraq war are not totally removed but have largely disappeared. What we're left with is the kind of deep pessimism that has affected financial markets in a very negative way."