FRANKFURT, Oct 7 (Reuters) - It is more important than ever that exchange rates reflect economic fundamentals and excessive volatility of such rates is best avoided, European Central Bank President Jean-Claude Trichet said on Thursday.
The ECB and European governments have shown little sign of
action to cap recent gains for the euro
"I would only say that more than ever I think that exchange rates should reflect economic fundamentals," Trichet told a news conference after the ECB kept interest rates on hold at a record low of 1.0 percent for the 17th month running on Thursday.
"Excess volatility and disorderly movements in exchange rates have adverse effects for economic and financial stability," he added.
The euro is trading at an eight-month high against the U.S. dollar and has gained nine percent since the ECB's last meeting in September. It is up almost 18 percent from a four-year low hit in June.
Low interest rates in Europe and Japan and expectations that the U.S. Federal Reserve is about to embark on another round of money printing that could weaken the dollar have pushed currencies to the top of the agenda for the gathering of finance chiefs from the G7 group of rich nations on Friday.
"We will have an occasion to exchange views on that (currencies) with in particular the authorities, the central bank governors and the ministers of finance, of the major floating currencies in Washington," Trichet said.
"I share the view of the U.S. authorities when they reiterate that they trust that a strong dollar is in the interests of the United States of America."
(Reporting by Marc Jones and Krista Hughes; writing by Patrick Graham; Editing by John Stonestreet)