Merkel says $1.30-$1.40 euro shows ‘normality’

German Chancellor Angela Merkel dismissed attempts to manipulate exchange rates, saying the present value of the euro against the dollar is within the currency’s normal range.

Merkel, speaking in Berlin, acknowledged concerns over the euro’s strength in southern European countries that have been “at pains to lower their labor unit costs in a fixed exchange rate regime” only to see the gains “melt away like the snow in the sun under certain conditions.”

“On the other hand, we have to say that euro exchange rates between $1.30 and $1.40 are part of the normality of the history of the euro,” she told an event marking 50 years of the German government’s council of economic advisers.

Merkel’s comments follow concerns she expressed on Jan. 24 over Japanese moves toward monetary easing. Officials from the Group of 20 nations meeting in Moscow last week pledged not “to target our exchange rates for competitive purposes,” without singling out Japan for allowing the yen to decline.

The chancellor wasn’t attempting to set an upper limit to the euro’s exchange rate, Steffen Seibert, her chief spokesman, said by text message. What she meant is that “the euro’s current exchange rate is nothing out of the ordinary,” he said.

Merkel said that the G20 finance ministers had sent an “important signal” at their Moscow meeting, and that the full G20 summit in September will assess progress in adhering to the statement.

“We want exchange rates to be set freely, but also advocate that all respect that,” Merkel said.

“We have time until September when there is the meeting of the heads of government and state to see whether everyone has held his promise.”

The 17-nation euro has appreciated almost 11 percent since July 24, when developments in the debt crisis centered on Greece drove the single currency down to a two-year low against the dollar and the lowest against the yen in more than 11 years. (Bloomberg)