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Draghi urges restraint in language after Mnuchin comments

2 min

Frankfurt am Main (AFP)

European Central Bank chief Mario Draghi on Thursday reminded trading partners to "refrain" from using language that could cause volatility on the currency markets, after US Treasury Secretary Steven Mnuchin talked down the dollar.

Without directly referring to Mnuchin, Draghi rebuked "communication not by the ECB, but by someone else" that had sent the euro soaring to a three-year high against the greenback.

Quoting from an International Monetary Fund statement last October, Draghi said nations had agreed they will "refrain from competitive devaluations, and will not target our exchange rates for competitive purposes".

He also warned against the "use of language" that could upset currency markets.

The greenback has plummeted after Mnuchin on Wednesday said a weak dollar was "good" for the world's top economy because it boosted trade opportunities.

Draghi's implicit telling-off did little to calm markets however, with the euro surging above $1.25 to hit its highest level since December 2014 as he spoke.

The euro's jump poses a headache to ECB policymakers, who are looking to end stimulus efforts as the economy picks up speed while still grappling with stubbornly low inflation.

A stronger euro makes imports cheaper, keeping the lid on consumer prices and putting the ECB's goal of an inflation rate just below 2.0 percent further out of reach.

It also hurts eurozone exporters whose goods become more expensive, potentially sapping growth in the 19-nation single currency area.

Earlier on Thursday, ECB policymakers kept key interest on hold and their bond-buying programme unchanged, leaving their massive support for the eurozone economy in place.

As the bank kept its easy money policies open-ended, Draghi said he saw "very few chances at all that interest rates could be raised this year".

ECB policymakers have repeatedly insisted that they do not target the exchange rate, with the institution's mandate extending only to the rate of inflation.

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