European Central Bank (ECB) board member Lorenzo Bini Smaghi Tuesday defended the bank's role in the aftermath of a warning by European Union leaders over the relentless rise of the euro against the US dollar.
Smaghi said the ECB's main task is to keep prices stable and avoid the effects of second-round inflation, adding that exports have held up well in recent years despite the rise of the euro.
Smaghi's remarks came after EU leaders issued a rare collective warning at their summit Friday.
Though analysts expect little impact on the direction of markets from the warning, it sent a clear signal that Europe is becoming uncomfortable with a stronger euro.
'Unprecedented' warning
Wrapping up a two-day summit in Brussels on Friday, leaders from the 27 EU member states made a last-minute addition to their final conclusion which said, "Excessive volatility and disorderly movements in exchange rates are undesirable for economic growth."
"In the present circumstances we are concerned about excessive exchange rate moves," said the leaders, breaking with the convention that EU heads of state or government normally steer clear of direct comment on exchange rates in order to respect the independence of the ECB in handling euro policy.
Luxembourg Prime Minister Jean-Claude Juncker said such an explicit reference to exchange rate levels was "unprecedented".
The warning came as the euro climbed to a series of new highs against the dollar. Up to Monday, the single currency of the 15-nation euro group had touched 1.5903 dollars in New York trading, the lowest level since it was introduced to world financial markets as an accounting currency in 1999.
