By Yali N'Diaye
PARIS (MktNews) - At current levels around $0.92, the euro remains undervalued against the dollar, since purchasing-power comparisons argue for long-term exchange rate around $1.00-$1.10, according to Raymond Douyere, member of Bank of France's advisory Monetary Policy Council.
The likely appreciation of the euro should bring a decline in eurozone inflation, Douyere said in an exclusive interview with Market News International.
"The good long-term exchange rate is between $1.00 and $1.10," he said, referring to Bank of International Settlement estimates based on purchasing-power parity calculations.
"The euro is returning towards this level," Douyere noted, adding, "Europe has interest in a strong euro and (economic) fundamentals will be priced in by the markets in the end."
Between the U.S. "strong dollar" policy confirmed by Treasury Secretary Paul O'Neil and European Central Bank officials' appeals for a strong euro, "the markets will decide," he said.
After falling to just above $0.82 at the end of October, the euro rose to nearly $0.96 at the beginning of this year, before depreciating again.
"The recent decline is temporary," Douyere argued, citing the U.S. external deficit as a negative factor for the dollar.