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Attempts to target exchange rates risk setting off a currency war: ECB

The currency volatility comes at an especially sensitive time for the ECB as it prepares to remove stimulus after nearly three years and 2 trillion euros worth of asset buys

Reuters  |  DAVOS/FRANKFURT 

EU flags outside the ECB headquarter
European Union flags flutter outside the European Central Bank (ECB) headquarters in Frankfurt, Germany (Photo: Reuters)

Attempts to target exchange rates risk setting off a war, a top European argued on Friday, just days after U.

S. officials made their case for a weaker dollar to boost trade.

said at the in that talks over exchange rates should be returned to the confines of global meetings like the and the G20, as the recent public noise is proving unhelpful.

"The last thing the world needs today is a war," Coeure said a panel at the in "We live in a world where exchange rates are not and should not be targeted for competitive purposes."

"We see lots of volatility created recently by different statements and I think that's just not helpful," Coeure said. "Volatility is not helpful and if that would reach a point where it would create any unwarranted consequence for us, any unwarranted tightening for monetary policy, we would have to reassess."

Coeure's comments come after U. S. officials earlier this week made the case for a weak dollar, sending the greenback tumbling to three year lows against the

His remarks echoed those of who on Thursday took a swipe at for talking down the dollar.

The volatility comes at an especially sensitive time for the as it prepares to remove stimulus after nearly three years and 2 trillion euros worth of asset buys.

The stimulus has rekindled inflation but a strong will weigh on import prices, putting downward pressure on inflation and raising fears the may not be able to end its bond buys as quick as hoped.

Despite the currency's strength, the zone is humming along and a key survey published on Friday suggests that price growth could even be faster in the coming years than earlier thought.

Headline inflation will continue to miss the ECB's target of almost 2 percent for years to come but projections in the survey were raised to 1.5 percent this year and 1.7 percent next year, underpinning Mario Draghi's cautious optimism after the bank's policy meeting on Thursday.

Indeed, Coeure added that wages are now ticking up at least tentatively, suggesting that the zone may be nearing a tipping point with regard to inflation.

In another piece of hopeful data, lending in December remained near post-crisis highs, thanks to ultra low borrowing costs.

(Reporting by and in Davos, Balazs Koranyi and Francesco Canepa in Frankfurt; Editing by Toby Chopra)

First Published: Fri, January 26 2018. 21:28 IST
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