A leading German think tank has called for a cut in euro-zone interest rates unless the dollar regains some strength.
Berlin's DIW economic research institute warned that the euro's recent rise could dampen German economic growth and said the European Central Bank (ECB) should cut interest rates if the currency continued to harden.
Mr Klaus Zimmerman, DIW president, said: "We do not expect a rate of $1.25 to be a big problem... \ a rate of $1.30 would certainly cause some difficulty if it was reached."
The ECB is expected to keep rates on hold at 2 per cent when it meets tomorrow, although some analysts believe further euro appreciation could trigger a cut.
At a press conference after the ECB governing council meeting, bank president Mr Jean Claude Trichet, who made his reputation as a guardian of the strong franc when governor of the Bank of France, is likely to play down the impact of the rising euro.
The bank believes the strength of the global rebound has so far offset the impact of euro strength, although some governing council members have started to voice anxiety about the prospect of further dollar weakness. - (Financial Times Service)
