Trichet calls US dollar fall 'brutal' and 'unwelcome'

The head of the European Central Bank made an attempt to put the brakes on the euro yesterday as the single currency hit an all-time high against the dollar for the second successive trading day.

The head of the European Central Bank made an attempt to put the brakes on the euro yesterday as the single currency hit an all-time high against the dollar for the second successive trading day.

Jean-Claude Trichet called the recent currency moves "brutal" and unwelcome - the same words he used in February when the rising euro last threatened to hit record highs. But with no visible backing from other top central bankers from the Group of 10 industrialised nations, his words lacked the force financial markets demand to rein in the euro.

The single European currency hit a record of $1.2985, close to the $1.30 level that traders believe could trigger an all-out assault on the dollar by the financial markets.

M. Trichet, who chaired the G10 meeting, said: "The recent moves, which tend to be brutal on the exchange markets between the euro and the dollar, are not welcome from the standpoint of the ECB." But when asked whether the G10 governors saw dollar weakness as a threat to economic growth, M. Trichet replied: "At the level of the global economic meeting, we didn't have such an exchange of views."

Currency dealers said the solo statement smacked of a lack of coordination among the top industrial nations, opening the door to driving the euro toward $1.35. Without firm backing for a strong dollar from the United States Treasury soon, the euro will keep rising, they said. "The G7 has no clear strategy and the markets know it," David Brown, the chief economist at Bear Stearns in London, said. "Once markets sense blood they want to taste it."

The euro dropped one-third of a cent immediately after M. Trichet's comment to $1.2913 and then regained some ground. Gavin Friend, a currency strategist at Commerzbank in London, said: "The dollar will continue to weaken again."

There has been speculation after recent speeches by Federal Reserve officials that the US Treasury is half-hearted in its declared strong dollar policy, and that the US favours a weak currency to help correct its huge current account deficit.

Nicolas Sarkozy, the French finance minister, used an official visit to Italy to call on the US to follow the statement agreed by the G7 earlier this year that excessive currency movements were undesirable for economic growth. "We believe that the statement remains valid and I think the United States must remember it," M. Sarkozy said.