IMF discourages gold mining investment in Ghana, Ashanti CEO tells Calandra


By Stella Dawson
Chief ECB Correspondent

FRANKFURT, Oct. 6 (Reuters) -- European policymakers
warned on Monday against too rapid foreign exchange
movements, in what analysts called an attempt to slow
the euro's rapid ascent against the dollar.

But by stopping short of calling its rise of more than 20
percent against the U.S. unit over the past year
unwarranted, they made clear they are more concerned
about the pace of the shift than its direction.

European Central Bank President Wim Duisenberg said
in a Spanish newspaper interview the ECB will do all it can
to ensure that the U.S. dollar's fall, which he called
unavoidable, is slow and gradual.

He added that the euro should not bear the brunt of the
dollar's decline alone -- an echo of Group of Seven financial
officials' concerns that Asian countries' currency sales to
retain their export edge unfairly pushes up the euro.

"We hope and pray that this (dollar) adjustment, which is
unavoidable, will be slow and gradual. Until now, the
adjustment is only against the euro," Duisenberg was
quoted as saying in the business newspaper Expansion.

German Finance Minister Hans Eichel also said in a
newspaper interview published on Monday that
policymakers "have to be vigilant that such movements
do not happen too rapidly."

Analysts called the remarks an opening salvo to temper
the speed of the euro's rapid climb but not a precursor to
central bank intervention to stop it.

The euro is up more than 10 percent this year alone in
response to the burgeoning U.S. trade and budget deficits
and the Bush administration's apparent indifference.

"The dollar is going down, no doubt about it, and all the
ECB can do is stand there with its fingers in its ears
and jawbone it (the euro) into a slow grind up", said
David Brown, chief European economist at Bear
Stearns in London.

Trying openly to talk the euro currency down would
cause loss of face at the ECB when all the forces point
toward to the dollar weakening further in the months
ahead, he said.

The single currency last week reached $1.1768, up
from $1.0760 on September 3, before Friday's strong
U.S. jobs data knocked it down to around $1.1580 on
Monday. Some analysts said the policymakers'
comments on Monday helped pinned it at lower levels.

The central bank must withstand some political pressure
on the currency's surge, though. Germany's DIHK
chambers of commerce and industry association said
on Monday it hopes the single currency does not rise
much above the $1.20 to $1.25 level.

"A rate of $1.25 would be damaging for exports. We
must be clear about this," Martin van Wansleben, its
head, said.

Eichel said policymakers must be wary of foreign
exchange movements that are too fast when asked
by the French daily La Tribune how the euro's rise
was affecting the European economy.

His deputy Caio Koch-Weser called on the European
Union and the United States to form an alliance to provide
leadership for the world's economy, which could address
trade and currency issues. He made the proposal in an
article in the Financial Times, co-authored with Fred
Bergsten of the Washington-based Institute for
International Economics.

Currency analysts said the ECB is far more likely to
use its interest-rate tool if it wants to counter the
export-damaging effects of the euro rise than to

"The euro zone has room to cut rates, so that would be
the first port of call, given their focus on price stability,"
said Shahab Jalinoos, senior currency strategist at ABN
Amro in London. Official ECB rates now are at 2 percent

A rising euro worries the ECB because it dampens demand
for euro zone exports just when the 12-nation economic
bloc, which stagnated in the second quarter, is struggling
to get back on its feet. But a strong currency can also
squeeze out import price pressures.

The ECB is not ruling out action in the foreign exchange
markets. A bank spokesman said the Financial Times on
Monday was wrong to conclude in its report on the
Expansion interview that Duisenberg had implied euro
intervention was unlikely.

"He left this question completely open," Manfred Koerber
told Reuters.


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