French Finance Minister Pierre Moscovici said the strength of the euro is hampering recover in the 17-nation economy, while also reflecting confidence that the region’s debt crisis is fading.
“The level of the euro is high and it creates some problems,” Moscovici said on a panel discussion hosted by Bloomberg Television in Davos, Switzerland. Those gains have come because “people feel confident in the euro today.”
The euro rose to an 11-month high against the dollar today, heading for a seventh week of gains, after the European Central Bank said lenders in the region handed back more three-year loans than expected. The banks’ ability to return those funds reflects broader confidence that the euro area has gotten beyond the worst part of its sovereign debt crisis.
On the same panel, Deutsche Bank AG Co-Chief Executive Officer Anshu Jain said the euro’s gains also reflect the U.S. Federal Reserve’s quantitative easing policy and a euro-area recession suggests the region’s currency should weaken.
“The euro has appreciated, partly because as the minister said, the euro-zone break-up fears receded,” Jain said. “But recently it is more because, someone talked about the printing press in the U.S., it largely has to do with the fact that quantitative easing in the U.S. is creating a weakness for the dollar. Longer-term it will come down to differential growth rates as it always does.”
The International Monetary Fund said this week it projects a second year of contraction in the euro region. It will shrink 0.2 percent in 2013, instead of growing 0.2 percent as forecast in October, while the U.S. will expand 2.1 percent, up from a 2 percent forecast, the Washington-based fund said.
“The printing machine will have to slow down considerably in order for people to have confidence in the dollar,” said Jin Liqun, chairman of China Investment Corp. At the same time, “I have confidence in the resilience of the U.S. economy.”
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