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Major Central Banks Intervene To Support Euro; Other Action Urged

Compiled By John S. McClenahen After days of record low exchange rates between the euro and the American dollar, the U.S. Treasury, the European Central Bank (ECB), the Bank of England, the Bank of Canada, the Bank of Japan, and other G7 financial institutions intervened Sept. 22 to support the euro, the common currency in 11 of the European Union's 15 nations. The surprise move was prompted by concern over the euro's weakness on the global economy. Shortly after the intervention, the euro surged against the U.S. dollar, the Japanese yen, and the British pound Sterling. It was the first time the ECB has intervened to prop up the single currency, which had lost 27% of its value against the U.S. dollar since launch at an exchange rate of US$1.17 on New Year's Day, 1999. Jerry J. Jasinowski, president of the Washington-based National Assn. of Manufacturers, praised the intervention, noting that "the recent decline in the euro against the [U.S.] dollar has negative implications for both Europe and the United States." However, he added, "while we support this intervention, we are aware that intervening in currency markets is not simple nor does it guarantee success. Consequently, we are writing the [U.S.] Treasury Dept. to call for a fundamental change in the [Clinton] Administration's economic policy with respect to energy prices, interest rates, and the dollar. The high growth rates achieved in the United States argue for a strong dollar, but not an overvalued dollar."

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