The euro is unlikely to rise much further in the short term following comments from new European Central Bank council member and Bundesbank president Mr Ernest Welteke. He said the current level of the euro against the dollar of around $1.05 is appropriate, but later caused some confusion by withdrawing the remark.

"The euro's exchange rate has stabilised at around $1.05 for a number of weeks now. I regard that level as appropriate because it doesn't jeopardise the pick-up in foreign demand, nor does it endanger internal price stability," Mr Welteke said in a speech prepared for delivery at a book presentation in Frankfurt. However, he later caused confusion by not reading the above passage when he actually delivered the speech, telling reporters afterwards that currency rates were a matter for the markets.

The euro closed at $1.0590, from $1.0581 the previous day, and at 65.90p against sterling, from 65.88p. As a result, the pound closed at 83.68p sterling, from 83.64p.

According to Mr Jim Power, chief economist at Bank of Ireland, the comments, particularly when combined with similar comments from other board members over the past week, strengthen the belief that the euro will stabilise. At the same time, there is growing evidence of a British recovery along with increasing conviction that British rates will hold. "This suggests sterling will remain strong for longer," Mr Power said

Mr Welteke's comments are consistent with a view that a recovery is materialising throughout Europe and that the major driving force behind it is the relative weakness of the euro.

"The ECB realises that, for the recovery to gather momentum, the weakness in the euro needs to be sustained," Mr Power added.

According to Mr Welteke, the single currency had started the year on a high, buoyed by enthusiasm for its introduction, but its external value then fell until around mid-July.

Mr Welteke, who took over as president of the German central bank on September 1st, added: "People started talking very quickly of a loss of confidence in the new currency, even though the development could be very plausibly explained by the gap between [the US and European] economies and interest rates. "The entire population was nervous, as if we all bought most of our goods from America and spent all our holidays there. But no-one talked of the euro's internal stability, which is much more important," Mr Welteke said.