Governments of the world's leading economies gave foreign exchange markets a clear warning over the weekend that they were prepared to repeat Friday's surprise intervention to support the euro.

"We will continue to monitor developments closely and to co-operate in exchange markets as appropriate," the Group of Seven industrialised countries said - a stronger commitment to intervention than the G7's previous stance.

Wim Duisenberg, European Central Bank president, who initiated Friday's action, said there were no plans to continue intervening, but added that the weapon of intervention "is always in our arsenal".

The G7 intervention, which market analysts estimated at several billion dollars, involved co-ordinated purchases of euros by the central banks of the US, Japan, Canada, the UK and ECB.

Mr Duisenberg added that there had been no change in the ECB's monetary policy, suggesting that the central bank would compensate for the foreign exchange intervention by issuing extra euros to avoid any effect on euro-zone money supply.

Other G7 central bankers tried to avoid giving the markets a target to aim at. Gordon Thiessen, governor of the Bank of Canada, said they had not "drawn a line in the sand" to defend the euro.

European governments also pledged to continue structural reform in euro -zone economies to support the currency.

In London, Tony Blair appeared to cast doubt on the prospect of more intervention today. Asked if he expected central banks to buy more euros on Monday, the prime minister said: "No, that's not anticipated, but whatever we do, we will do with other countries." But the Treasury later played down these remarks, saying they merely reflected a warning that intervention would not be pre-announced.

Ernst Welteke, the Bundesbank president, said the intervention had been successful and it was perfectly normal that the euro had retreated slightly after the central banks' action.

Commercial bankers said the ECB would almost certainly have to continue intervening this week to show the markets it was serious about pushing up the euro's value.

The industrialised countries also claimed widespread international support for driving oil prices lower after oil-exporting countries joined in a call for an increase in production by the International Monetary Fund's policy-setting committee.

Gordon Brown, the chancellor, who chairs the IMF committee, said it was significant that the oil-exporting countries present - including Saudi Arabia - signed the committee's communique. The committee praised the US decision to release oil from its strategic reserve.

Larry Summers, US Treasury secretary, said the move, announced on Friday, was justified as "a careful attempt to respond to pressures in the oil market".

more from FT.com
Back to timeline

EMAIL THIS PRINT THIS MOST POPULAR