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UPDATE 2-Juncker: further euro rise may slow Europe's recovery

Published 10/16/2009, 12:34 PM

(Adds more quotes from Juncker)

By Michele Sinner

LUXEMBOURG, Oct 16 (Reuters) - The strength of the euro does not yet cause too much concern, Eurogroup Chairman Jean-Claude Juncker said on Friday, but a continued rise by the single currency could slow Europe's economic recovery. "I'm not concerned too much by the exchange rate we are observing. But if it continues in the way it started weeks ago, I could become concerned at a certain junction. Don't ask me where that junction is located exactly," Juncker said.

"If the euro's direction were to continue to move along the lines of recent weeks, there is a risk ... that it could slow economic recovery in Europe," Juncker told a news briefing.

The euro is at 14-month highs against the dollar at around $1.49, having risen by almost a fifth since the start of the year. The euro has appreciated by the same amount against the Chinese yuan, which is virtually pegged to the dollar.

Asked whether he had been asked to travel to China to urge a more flexible yuan exchange rate regime, Juncker replied: "I will go to China with Mr (European Central Bank President Jean-Claude) Trichet and Mr (EU Economic Affairs Commissioner Joaquin) Almunia before the end of the year."

The three euro zone policy-makers visited China to discuss exchange rates in late 2007.

Finance ministers and central bankers from the Group of Seven industrialised nations have long called on China to let its yuan currency appreciate to help ease global trade and savings tensions.

Asked if the weakness of the dollar and other currencies against the euro would be discussed by euro zone finance ministers and the ECB when they meet on Monday, Juncker said:

"I would suppose that over the course of Monday's meeting we will address the subject with the president of the ECB. We will tell you afterwards whether there is something new to be said," Juncker said.

"But I would guess that the poem will stay as the poem was," he said in a likely reference to the message on exchange rates issues by the G7 after their last meeting in Istanbul on Oct 3.

Juncker reiterated he did not like excess exchange rate volatility and disorderly movements and said the euro zone was "always very happy" when U.S. authorities reiterated that a strong dollar was in the interest of the U.S. economy.

He said it would be good if markets heard that message.

"The U.S. authorities made it crystal clear and I would be happy to see the markets take into consideration what the U.S. political and monetary authorities are saying in this very context," he said. (Reporting by Michele Sinner, writing by Jan Strupczewski, editing by Dale Hudson/Victoria Main)

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