Mario Draghi, European Central Bank president, yesterday intervened in what some policy makers fear has the makings of a currency war, sending the euro to its lowest level against the dollar in nearly two weeks.
The strength of the euro has alarmed European businesses and politicians since a sustained rise could kill early signs that the battered eurozone might return to growth this year. But with central banks around the world adopting ever looser monetary policies, concerns have grown over a series of competitive devaluations – dubbed a currency war – as nations try to ensure that their exports remain competitively priced.
After the ECB’s monthly interest rate-setting governing council kept rates on hold at 0.75 per cent, Mr Draghi reiterated that the bank’s mandate was to target inflation – or maintain price stability – and not the exchange rate. But he added: “We want to see if this appreciation is sustained and if it alters our assessment of price stability.”