Global cooperation is needed to avoid brutal volatility in foreign exchange markets, a European Central Bank policymaker said today, as others debated the role of the bank's crisis support measures.
Guy Quaden, head of Belgium's central bank, hit out at the recent sharp swings in foreign exchange markets.
"We have to avoid brutal movements" on forex markets, "And so I hope ... that without delay we will have more cooperation on that field," Market News International quoted Mr Quaden as saying.
"We live in a world of floating currencies, but excessive volatility is bad and to be avoided by common efforts at the world level."
International tensions over currency rates have risen sharply, sparking increased talk of intervention from Asia to South America, and there was no sign of any resolution after world leaders met at the International Monetary Fund conference at the weekend.
ECB president Jean-Claude Trichet last described FX lurches as "brutal" in 2007. It is seen as one of the ECB's strongest forms of verbal intervention.
In a newspaper interview, Yves Mersch, Mr Quaden's Luxembourg counterpart, played down the sharp rise in the euro against the dollar over the last month, however. "One should not look excessively at bilateral exchange rates. What is important is the effective exchange rate. There we see that the third quarter is not above the second quarter."
Mr Quaden was also quoted saying that the euro zone's economic recovery would continue at a more moderate pace and that the ECB saw no deflationary risk at present.
ECB vice-president Vitor Constancio also waded into the debate on whether the ECB would press on with removing its crisis support measures early next year.
"We have not pre-committed to anything, so we will examine the evolution of the situation and then we will decide. So we are not pre-committed to anything," he told Market News.
Economists have questioned whether it would be wise for the ECB to reel in its support at a time when central banks in other major advanced economies are turning back in the direction of stimulus measures.
Reuters