Draghi seen not forceful with euro

FRANKFURT: Mario Draghi’s words on the euro seem to have lost a bit of their magic, but maybe he wasn’t trying very hard.

Despite a rare mention of the currency’s appreciation the European Central Bank (ECB) president’s opening statement, an escalation from the account of the last meeting when policy makers noted their collective concern, the euro rose on Thursday.

Aside from admitting that the exchange rate’s “volatility” is problematic, he declined to talk about any action to reverse the course.

“The strategy of this soft intervention is to prevent further speculative upward pressure on the euro,” said Lena Komileva, an economist at G Plus Economics. “Draghi didn’t seem overly concerned.”

The euro’s continued gain as Draghi spoke stands in contrast to its tumble in May 2014, when the ECB president signaled “serious concern” about the the exchange rate. The difference then was that the economy appeared fragile and the euro was approaching US$1.40.

In August, the euro spiked above the US$1.20 mark for the first time in two years after Draghi avoided mentioning it in Jackson Hole. Addressing it on Thursday may have just been enough to discourage traders from pushing it even higher.

It may also stop the issue from interfering too much in the debate on how to start winding down bond purchases in 2018.

Draghi was questioned about the currency at least half a dozen times. While he admitted that there was “broad” concern in the governing council over the euro, he said the the currency merely warranted “monitoring,” stopping short of stronger verbal interventions.

“Draghi could have been more forceful on the euro,” said Marco Valli, an economist at Unicredit in Milan.

“But the governing council seems to think that at least part of the appreciation is a consequence of the economy’s strength. Therefore, sounding too concerned would have not been credible.”