Finland’s Katainen Rules Out Action to Weaken Euro Exchange Rate

Finnish Prime Minister Jyrki Katainen ruled out any possibility of policy makers intervening to halt the euro’s appreciation.

“We will never take political action to weaken the exchange rate,” Katainen told reporters in Helsinki today. “Historically, the exchange rate is still tolerable.”

The euro has climbed 7.7 percent to $1.2993 against the dollar since July, reflecting the U.S. Federal Reserve’s asset purchases and low interest rates. The 17-nation bloc is shrinking for the second year after a debt crisis that led to five countries requesting an international bailout. The shared currency is higher than the average of $1.2125 since its inception. Analysts forecast the euro will end this year at $1.29 after climbing to $1.32 next quarter, according to the median of 63 estimates in a Bloomberg survey.

Bill Gross, manager of Pacific Investment Management Co., the world’s biggest bond fund, said last week the European Central Bank should adopt policies to help the euro depreciate relative to the U.S. dollar. ECB policy makers this week downplayed the concerns.

Executive Board member Jens Weidmann said yesterday the euro’s level doesn’t threaten the region’s economic recovery, and governing council member Erkki Liikanen reiterated the central bank only seeks to ensure price stability and doesn’t have an exchange-rate target.

France’s Industry Minister Arnaud Montebourg last month called for a more activist and “political” management of the euro, saying the ECB “should prepare to confront a new currency war in which the weakening of currencies becomes a political tool.”

Katainen said he doesn’t see euro’s strength hampering competitiveness in the single-currency area. “I hope the rate reflects the inner strength of the region,” he said. “Structural changes boost competitiveness.”

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