European finance ministers are to meet for regular talks today again clouded by the euro's record surge and amid growing speculation about possible Japanese or European currency market intervention.
At their last meeting three weeks ago, when the euro was flirting with the US$1.30 mark, ministers from the 12-nation eurozone limited themselves to saying that excess volatility in exchange rates was "undesirable."
The very same day US Treasury Secretary John Snow poured cold water on European hopes for US action to support the flagging dollar, saying that "currency values are best set in open and competitive exchange markets."
Since then the euro's surge has only continued, taking it to a record US$1.34 Friday, a level that is severely damaging the competitiveness of EU exports.
And the EU ministers -- meeting this evening and tomorrow for regular talks -- cannot count on an interest rate cut by the European Central Bank, whose chief Jean-Claude Trichet ruled out that option on Thursday.
Trichet, who will also be at the Brussels talks, was evasive about the other option that could brake the greenback's slump: Market intervention in the form of massive buying of dollars.
While noting that intervention "is a weapon" central banks had at their disposal, he added: "Verbal discipline is really of the essence" -- perhaps referring to recent comments on intervention by Japanese monetary officials.
Japanese Finance Minister Sadakazu Tanigaki on Friday again warned that the yen was still too high and suggested that Tokyo may intervene in an effort to protect its exports.
"While continuing to monitor developments closely, we will take appropriate action in a timely fashion if necessary," he said.
But if the euro remains a major concern, falling oil prices are at least providing some relief for the EU as it seeks to support a fragile recovery, with growth expected at just 1.9 percent next year according to the latest ECB data.
Crude prices, which surged above US$50 a barrel last month, slumped to a three-month low at the end of last week including one US$6 fall in the space of just two days.