Euro-zone finance ministers discussed the strength of the euro last night amid French concerns that the currency's gains against the dollar could hurt economic growth.

As the euro hit its highest level since March 2005, French finance minister Thierry Breton called for "collective vigilance" over the euro's exchange rate.

His comments reflect growing unease in Paris, which is in the grip of a presidential election campaign that could be determined by the government's handling of the economy.

As European markets closed yesterday the euro bought $1.3119 in mid-day trading in New York, up from $1.3079 late on Friday.

Earlier the euro reached $1.3172, its highest point for 20 months, with analysts predicting a narrowing US interest rate advantage against the euro zone as rates continue their upward trend in Europe. The prospect of intervention in the exchange markets was downplayed by Jean-Claude Juncker chairman of the Eurogroup, which is made up of the finance ministers of countries that use the euro.

He said he was not too concerned by the current strength of the euro and the currency was still "lengths away from the critical zone".

"We will discuss, as we normally do, exchange rate issues, but as far as I myself am concerned, I'm not too concerned," he added.

French concerns over the euro have been heightened by a rapid slow-down in its economy in the third quarter. This has prompted economists to cut their growth estimates for the year to the bottom of the government's target of 2 to 2.5 per cent.

The rise in the euro makes euro-zone exports more expensive in the US and there is a fear that a drop-off in exports could undermine growth and affect employment in an election year.

Ernest-Antoine Seillière, president of Unice, the European employers' organisation, also said the ECB and euro-zone finance ministers should be "more concerned about currency developments" and that the ECB should put interest rate increases on hold.

"We believe that it's time to really consider the situation and pause, which means to take time to appreciate the strength of inflation and take into account the capacity for the euro zone to grow next year and fully follow the currency evolution rate," he said.

However, the ECB is expected to press ahead with another quarter-point rise in its main interest rate to 3.5 per cent next week.

But, if sustained, analysts predict the euro's appreciation could curb the scope for further increases in borrowing costs in 2007. - (Additional reporting, Financial Times service)