13 February 2007, 15:38  EU's Almunia says exchange rates currently 'no problem'

Current exchange rates, mainly the value of the euro against the yen, pose no threat to the economy, the EU's Commissioner for Economic and Monetary Affairs Joaquin Almunia said in a magazine interview. "We mustn't get carried away. At their current level, exchange rates are no problem for the economy," Almunia told the fortnightly magazine Capital in an interview to be published in its latest edition and released in advance. The exchange rate of the euro against all of its trading partners is currently about 2 pct higher than the average of the past 25 years. "That is manageable," Almunia said. At a meeting of Group of Seven (G7) finance ministers and central bank chiefs in Essen at the weekend, world finance chiefs decided not to undertake any concrete measures to curb the weakness of the yen. Instead, they issued a veiled warning to the markets not to bet on the yen remaining low for much longer. Earlier today, Luxembourg premier and finance minister Jean-Claude Juncker had described the yen's long slide against the euro as a "problem". The phenomenon of so-called "carry trades", which experts say is behind the slide, represented "the biggest danger" to the international financial system, which could trigger a "catastrophe" if the bubble were to explode. Analysts argued that the bubble is the result of the gap between Japan's super-low interest rates of 0.25 pct and those in the US and the euro zone, which encourages investors to borrow cheaply in yen to invest overseas.

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