ECB’s Nowotny Says Euro Exchange Rate Is Within ‘Long-Term Band’

European Central Bank Governing Council member Ewald Nowotny said the appreciating euro shows the central bank’s measures helped boost the economic outlook, and the currency is trading in line with historic rates.

“We have seen that economic prospects are improving in Europe as a whole,” Nowotny told reporters in Vienna today. “The measures taken by the ECB have undoubtedly had a stabilizing effect. But this is still an exchange rate that’s moving within the usual, the long-term band.”

The euro extended gains today after a report showed European economic confidence jumped more than economists predicted. Europe’s 17-nation shared currency strengthened 0.4 percent to $1.3545 at 1:08 p.m. London time, trading above $1.35 for the first time since December 2011. Even after climbing 2.7 percent this year, it’s still below the five-year average of $1.3720.

A slump in the yen of at least 9 percent against all its 16 major peers in the past three months made the risk of so-called currency wars, in which trade partners retaliate to protect their companies in markets, a theme of the World Economic Forum’s annual meeting in Davos, Switzerland, last week. With Japan’s Prime Minister Shinzo Abe pushing for currency-debasing monetary easing, German Chancellor Angela Merkel told delegates on Jan. 24 that “I can’t say I’m completely free of worry when I look at Japan right now.”

While the upswing in Europe is beginning to show in economic indicators, growth rates are still subdued, Nowotny said today. “Confidence indicators such as the Ifo index show an upswing, but you have to say, at a weak rate,” he said. Forecasts for Austria and Germany are likely to be revised slightly upwards, he said.

To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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