cnbc.com / By Ralph Atkins Financial Times / Published: Wednesday, 23 Jan 2013 | 2:01 AM ET
Who would have thought six months ago that in early 2013 the euro would rank among the world’s strongest-looking currencies?
Europe’s single currency has risen almost 7 percent on a trade-weighted basis since late July. It is up more than 25 percent against the yen and 10 percent against the dollar.
The currency’s strength follows European Central Bank action to remove the risk of a eurozone break-up. It also reflects global economic power playing – or what Jens Weidmann, Bundesbank president, warned on Monday was the “increased politicization” of exchange rates.
Mr Weidmann meant Japan, which on Tuesday starting pushing more aggressively for an inflationary stimulus. But the US remains bent on quantitative easing, while sterling’s weakness has been semi-officially endorsed in the UK (the eurozone’s most important export destination) and encouraged by talk of exiting the European Union.
If a covert currency war is under way, the ECB is missing in action – which raises questions about the central bank’s level of concern.
One might even have the impression the ECB was not bothered. At the end of last year, Mario Draghi, ECB president, appeared to be trying to talk the currency down, letting slip that a further loosening of eurozone monetary policy had been actively discussed at December’s meeting and striking a gloomy tone on eurozone economic prospects.