European Central Bank President Jean- Claude Trichet and counterparts from the Group of 10 nations may stick to their forecast that the global economy is recovering and welcome the euro's decline from a record against the dollar when they meet in Basel, Switzerland today. ``The state of the global recovery is not that bad,'' said Lorenzo Codogno, a senior economist at Bank of America Corp. in London. ``Central bankers are probably more comfortable with recent foreign exchange developments.''
Trichet, chairman of the Group of 10 forum of central bankers, said at January's meeting that global growth is ``strong'' and ``steady'' and expressed concern about ``excessive volatility'' in exchange rates. The pace of expansion in the dozen nations sharing the euro slowed in the fourth quarter as the currency's ascent curbed export growth. The euro, which surged 16 percent against the dollar in the four months before the Jan. 12 meeting, bought $1.2382 at 7:34 a.m. in Frankfurt. The currency touched a record of $1.2930 on Feb. 18. The yen has dropped 4.6 percent against the dollar since January. The dollar bought 112.13 yen today. Trichet is due to hold a press conference at around 12:30 p.m. in Basel. The bank governors meet every two months under the auspices of the Bank for International Settlements, which serves the world's central banks. The G-10 comprises 11 nations and includes the U.S., Japan, Germany, the U.K., Italy, France, Canada, Sweden, Belgium, the Netherlands and Switzerland.
Basel II, ERM II
Policy makers will discuss prospects for global economic growth and the Basel Capital Accord, known as Basel II, which is a set of guidelines on who much capital banks should set aside, Belgian central bank chief Guy Quaden and Hungarian counterpart Zsigmond Jarai told reporters late yesterday. Bankers will also discuss the ERM II, or Exchange Rate Mechanism II, which is designed to help countries prepare for adopting the euro. Ten more countries, including Hungary and Poland, will join the European Union from May and aim to keep their currencies in closer harmony with the euro. Exporters including Sony Corp., the world's second-biggest consumer electronics maker, and Siemens AG, Germany's largest electronics maker, are benefiting from a U.S. rebound that may see the world's largest economy expand 4.6 percent this year, the most since 1984, according to the median in the latest monthly survey conducted by Bloomberg News.
Fukui Optimistic
Optimism among Japanese executives rose for a second quarter in the January-to-March period as companies including Sharp Corp., Japan's biggest maker of liquid crystal displays, boosted capital spending in response to higher foreign demand. ``The economy is on the right course,'' Bank of Japan Governor Toshihiko Fukui told reporters in Basel late yesterday. Japan's economy, the world's second largest, is gathering ``more momentum, more investment,'' he said. Clouding the outlook for accelerating global expansion, a U.S. government report Friday showed employment growth slowed last month, adding to evidence of a jobless recovery that's sapping consumer confidence and hurting President George W. Bush's reelection chances. Employers added 21,000 workers in February, less than the lowest forecast in a Bloomberg survey. ``I could understand if there was a certain anxiety that the recovery is losing momentum,'' said Kenneth Wattret, an economist at BNP Paribas SA in London. ``The prospect of a jobless recovery will have been encouraged by today's report.''
Trichet's Concern
Trichet has already voiced concern about consumer spending in the euro region's $9 trillion economy. ``It is time'' for consumers to step up spending because their reluctance to do so is a ``risk'' to the recovery, Trichet said at the ECB's monthly press conference on Thursday. The 0.3 percent quarterly growth rate of the euro region in the final three months of last year compares with 1 percent in the U.S. and 1.7 percent in Japan in the period. German unemployment rose for a second month in February and MAN AG, the third-largest European truckmaker, said last week it will probably cut 1,000 jobs this year. Industrial production in Germany, Europe's biggest economy, probably fell for the first month in four in January, according to the median forecast of 36 economists surveyed by Bloomberg News. The Economics and Labor Ministry will release that report on Tuesday.
Dollar Purchases
With central bank interest rates at zero in Japan, 1 percent in the U.S. and 2 percent in Europe, there is little the central bank governors can do to stimulate the economy. Trichet has said it's up to governments to do more to stimulate domestic demand by loosening labor laws and other restrictions to growth. Bankers may also discuss the currency strategies of Asian policy makers. U.S. Federal Reserve Chairman Alan Greenspan said last week that central banks in the region may soon have to reduce their ``extraordinary'' purchases of dollar assets. Japan, China and other Asian nations' central banks have bought $240 billion in dollar assets since the start of 2002 in an effort to keep their currencies from rising against the dollar, he said. Greenspan also said Chinese currency policy could cause ``overheating'' in the world's sixth-large economy. China's central bank reaffirmed its policy of keeping the yuan's fixed exchange rate after Greenspan's speech on Tuesday. ///www.bloomberg.com