The support of the US in intervening to rescue the euro yesterday was seen as a critical new element in attempts to stem the currency's continuing decline. However, the Federal Reserve refused to elaborate to any extent on its role in the surprise intervention which it mounted with Japan and the EU by selling dollars to buy euros.
Estimates by forex dealers of the amount of euros bought by the central banks ranged upward from $1.5 billion (€1.7 billion).
But economists said this was less important than the fact that the central banks had sent a clear signal that the euro's decline had gone far enough.
The Treasury Secretary, Mr Larry Summers, said the concerted intervention in the exchange markets was necessary "because of shared concern about the potential implications of recent movements in the euro for the world economy". But he would not give any details about the extent and timing of the US intervention.
Mr Summers, who was leaving for the International Monetary Fund annual meeting in Prague, insisted that US policy on the dollar was unchanged. "As I have said many times, a strong dollar is in the national interest of the United States," he said.
Earlier in the week, Mr Summers had refused to speculate about whether the US would join the intervention effort.
Yesterday, he said the Fed would not have intervened without signs of a potential for growth in the EU economies.
"There's no question that there are ongoing reforms in Europe. Continuing structural reforms in Europe to increase productive potential, to raise incentives for job-creating capital investment in the continent are recognised as priorities by European leaders," Mr Summers said.
He warned, however, that "recent developments in oil markets are obviously a concern for consumers and businesses around the world".
He expected that the G7 finance ministers would discuss energy market issues. "More stable prices in line with historic norms are in the mutual interest of both oil-producing nations and consumers," he said.
Japanese officials said its intervention had been aimed as much at curbing the yen's strength against the euro as at boosting the euro against the dollar. Until yesterday, the euro had fallen by more than 30 per cent against the yen and more than 25 per cent against the dollar since its launch in January 1999.
The US intervention to support the euro surprised some foreign currency traders who had believed that the Fed would not join an international effort to sell dollars so close to a presidential election lest it trigger concerns on Wall Street about the level of the dollar.
The strength of the dollar has helped to attract huge foreign investment in the US, where the economy has been booming while prices have reached record levels. Any action that could be seen as weakening the dollar and causing any loss of confidence in the US economy would not be welcomed by the Clinton administration as it could damage Vice-President Gore's prospects in the presidential election on November 7th.
Euro-zone finance ministers agreed on intervention in Versailles earlier this month, but left the timing and execution to the ECB, officials said.
