Euro drifts as crew go missing

The euro is rapidly acquiring all the characteristics of the Marie Celeste, drifting aimlessly with no one on board.

The latest raft of positive economic data in the US, fears for the euro-zone recovery and the mixed, if any, signals coming from the European Central Bank and its leaders conspired to send the currency to new lows against sterling and the dollar.

For the first time in its 13-month life, the euro closed below parity with the dollar on Thursday. While it had previously dipped below parity during trading hours, the currency had always managed to struggle back above that mark by the close.

The importance of the parity support level was illustrated yesterday when the euro dropped almost 1.5 US cents to finish at $0.9758, despite a general feeling that the currency is substantially undervalued at present.

While the ECB has made some play of the fact that it does not have an exchange rate target for the euro, the time has surely come for the governing council to break the deafening silence which seems only to encourage the euro's decline.

While that decline may give exporters a helping hand, it threatens to provide an inflationary boost on the back of more costly imports into the euro zone. And it is winning the ECB no friends in those countries outside the zone whose exports are suffering.