Europe’s top economic official has cautioned Washington and US Secretary of the Treasury Steven Mnuchin about talking down the US dollar’s exchange rate, which helps US exporters, but could make life harder for Europe and other trade partners.
European Central Bank (ECB) President Mario Draghi did not mention Mnuchin by name, but was quick on Thursday to say that global leaders had agreed for years that “we will refrain from competitive devaluations.”
Draghi’s swipe came after Mnuchin said this week that “obviously a weaker [US] dollar is good for us as it relates to trade and opportunities.”
Those remarks broke with a 20-year US policy of speaking in favor of a strong US dollar. The euro rose to a three-year high of US$1.25 upon Mnuchin’s remarks.
The higher euro can become a headache for Europe as it can hurt its exporters and weigh on inflation, which is already worryingly low.
Draghi cited the repeated joint statements by international finance officials in which they commit to refrain from lowering their currencies’ exchange rates to gain trade advantage at the expense of other nations.
Draghi also said that swings in the euro exchange rate with the US dollar — mostly up in the past few days — were “a potential source of instability” that required “monitoring.”
The exchange rate was not a policy goal for the ECB, but had to be considered in its deliberations about what to do about inflation, he said.
Draghi made his comments at a news conference following a decision by the bank’s 25-member governing council to leave its stimulus programs and interest rates unchanged.
The bank gave little additional hint about whether its 30 billion euros of monthly bond purchases would run past September.
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