The chief economist at the European Central Bank refused to rule out intervention to support the euro yesterday.
"Intervention is part or the armoury of a central bank," Mr Otmar Issing told journalists at a dinner yesterday. But he said: "We'll make use of such a weapon first and only talk about it afterwards."
Mr Issing acknowledged the current weakness of the euro would have "negative" consquences for inflation, since it makes imports more expensive.
"A strong euro is in all our interests," he said.
Although Mr Issing refused to be drawn directly on the possibility of intervention, his concerns about the inflationary effects of the weakness of the euro helped fuel speculation the ECB might soon step into the markets to prop up the ailing currency.
The euro rose slightly against the dollar as a result today, edging up to 0.8535 dollars from 0.8518 dollars in New York late yesterday.
"There is no doubt" that euro weakness made imports more expensive and therefore contributed to inflationary pressures, Mr Issing said.
AFP