GulfBase Live Support
17/04/2016 07:12 AST
The European Central Bank is unhappy with the US dollar’s recent fall but accepts it as a natural consequence of the Federal Reserve’s cautious economic outlook and sees no reason to act to weaken the euro, three ECB sources said.
A weaker dollar — it has shed 4 percent against the euro since the beginning of March and 6 percent in the past year — is reducing imported inflation in the euro zone, making it harder for the ECB to boost prices after repeated bouts of negative inflation.
But with many big central banks easing monetary policy to stimulate sluggish economies, policymakers risk getting into costly currency wars, one ECB official said.
“We have to accept that the exchange rate channel is not working like it used to,” said an ECB insider who asked not to be named.
“With the Fed’s lowered rate path comes a weaker dollar and we need to avoid even the impression that we’re targeting the exchange rate.”
“The stronger euro doesn’t help inflation, but we’re still in a completely acceptable range and oil is finally helping us,” the source added.
The dollar, which is also trading near a 17-month low against the yen, also took a hit last month after Fed policymakers issued projections signalling that only two interest rate hikes were coming in 2016, instead of the four predicted in December.
US economist Nouriel Roubini suggested on Friday the ECB was angry over a perception that the US central bank has been talking down the dollar, and wanted to push for a currency accord at a meeting of the G20 major economies in Washington this week.
But conversations with central bankers and government officials suggested no such tension.
A senior Japanese finance ministry official said markets had misunderstood the G20’s Shanghai communiqué in February, as it committed to avoid intentional devaluation but did not prohibit monetary policy moves that might indirectly result in currency swings.
“I’m mildly annoyed with the currency moves, sure, but we just have to deal with it,” another ECB source said. “There was an in-principle agreement about exchange rates expressed at the G20 communiqué, but the rising risk of ‘Brexit’ and the Fed’s adjustment of its stance have both resulted in relatively big moves.”
“But the Fed is clearly devising policy for the benefit of the US economy, and there isn’t a suggestion that their aim is to devalue,” that source added.
The ECB officials all denied that a complex but secret currency deal had been struck at the G20 meeting in Shanghai, and said only that there had been an intellectual understanding that trying to depreciate currencies made little sense.
The sources added that the recent jump in oil prices was helping to offset the deflationary impact of the firming euro.
The ECB’s latest projections were based on a Brent crude oil price of $35.90 a barrel. Brent crude futures traded at just above $43 a barrel on Friday.
Arab News
Ticker | Price | Volume |
---|---|---|
SABIC | 114.77 | 5,915,941 |
SAMBA | 26.98 | 1,138,683 |
STC | 83.41 | 257,644 |
DARALARKAN | 13.47 | 74,648,349 |
US Dollar | 1.00 |
Saudi Riyal | 3.75 |
Derham Emirati | 3.67 |
Qatari Riyal | 3.65 |
Kuwaiti Dinar | 0.30 |
Bahraini Dinar | 0.38 |
Omani Riyal | 0.39 |
Euro | 0.81 |
British Pound | 0.71 |
Japanese Yen | 104.70 |
05/04/2018
Oman has the means to maintain its currency peg and has no plans to change it even though the decline in oil prices has hurt its finances, central bank Governor Tahir Al Amri said.
Oman’s g
Gulf News
02/04/2018
China’s yuan firmed against the dollar on Friday and is set to post its biggest quarterly gain in a decade, as the country attracts capital inflows and US trade frictions bolstered expectations of a
Gulf News
01/04/2018
The US dollar’s share of currency reserves reported to the International Monetary Fund declined in the final quarter of 2017 to a four-year low, as other currencies’ shares of reserves grew, data rel
Gulf News
29/03/2018
The US Dollar Index, a measure of the value of the US dollar against a basket of currencies, teetered and dropped to quarterly lows in March, which also happen to be the lowest the index has been sin
The National
29/03/2018
Turkey’s lira weakened beyond the psychologically important level of 4.0 to the US dollar yesterday, bringing it close to a record low, as concerns about double-digit inflation, and politics, continu
Gulf Times