Bundesbank vice-president Mr Jurgen Stark said yesterday there were good reasons to expect further gains in the euro, which has rebounded sharply in recent weeks after plumbing record lows last month.

He told reporters the euro, which had dropped 25 per cent in just over 16 months to hit record lows in May, should benefit from a narrowing gap between growth rates in Europe and the United States, where recent data have shown signs of a slowdown.

"I think there are good reasons to expect a further strengthening," said Mr Stark, in Basel to attend today's annual meeting of the Bank for International Settlements.

"What is of utmost importance is (that) the growth differential between continental Europe and the United States will narrow," he said, noting that the Organisation of Economic Co-operation and Development had predicted euro zone growth would outpace US expansion in 2001.

"The present exchange rate level of the euro does not reflect fundamentals," he said.

Mr Stark declined to comment on suggestions in financial markets that foreign exchange intervention by the European Central Bank to support the single currency in the current environment - rather than when it was falling - would be effective and mark a definitive end to the euro's decline.