Euro is "abnormally high" against dollar: French bank head

PARIS - The euro is now "abnormally high" against the dollar but its strength shields the eurozone from stronger inflationary pressure, the head of the French central bank said Monday.

"We are clearly in a period where the euro is abnormally high," Christian Noyer told France-Culture radio.

"When I say 'the euro' I should say 'many currencies in the world are abnormally high against the dollar,' which is a way of saying the dollar is abnormally weak."

Noyer maintained that while a strong euro "is not very pleasant, it does bring us something at the moment, which is a certain protection against higher prices."

He pointed to crude oil, which is priced in dollars and is therefore cheaper for the eurozone than it might otherwise have been, as well as food products.

But Noyer nonetheless said prices in the eurozone had risen to "very excessive legvels, well beyond our objective for price stability."

Eurozone consumer prices rose 3.5 percent in annual terms in March, their highest level since the creation of the euro in 1999 and well beyond the European Central Bank inflation target of just under 2.0 percent.

The dollar on Monday rose against the euro in London but fell against the yen after world finance chiefs voiced growing concern about the US currency's recent slide, dealers said.

In early trading, the euro weakened to 1.5777 dollars from 1.5805 in New York late on Friday.

Against the Japanese currency, the dollar fell to 100.84 yen from 100.93 on Friday.

The Group of Seven (G7) rich nations surprised the market by abandoning their usual mild language on foreign exchange in a joint communique following a meeting on Friday in Washington.

They expressed worry that sharp fluctuations in major currencies could undermine the stability of the global economy and markets, but investors doubted the G7 could intervene to arrest volatility in the currency market.

"The US dollar is moderately higher, with most of the major currencies weaker after the G7 statement expressed concerns over swings in foreign exchange markets," said ABN Amro analyst Melinda Smith.

"The joint statement was more pointed than past statements on volatility."

evs-ito/nh/tw

04/14/2008 11:46 GMT