Ernst Welteke, the Bundesbank president, said on Monday the world's seven leading industrialised countries would discuss exchange rate developments next weekend, but indicated that co-ordinated US-European intervention in support of the euro was unlikely.

"We're in an election year [in the US] and that makes me think it would be pretty difficult to get a clear position from the Americans," said Mr Welteke.

Financial markets are waiting to see what action the Group of Seven finance ministers will take at next weekend's meeting in Prague, now that the European Central Bank has signalled that its patience with the euro's falling exchange rate is wearing thin.

Mr Welteke was speaking after the euro slipped to another lifetime low against the dollar of less than $0.8520, before recovering slightly later in the day. The latest fall was attributed partly to a taboo-breaking remark last Friday by Alfred Broaddus, the president of the Federal Reserve Bank of Richmond in the US.

The markets are not expecting the G7 to announce an initiative along the lines of the 1985 Plaza Accord, which resulted in waves of intervention by the world's main central banks to drive down the dollar.

But the ECB has raised expectations that it will take further steps in defence of the euro after it announced last week for the first time that it was buying euros with interest income earned from its foreign exchange reserves.

Christian Noyer, the ECB's vice-president, was quoted on Monday as saying that the euro was "dangerously undervalued" and that markets should be prepared for an "abrupt reversal" in the exchange rate.

Mr Welteke repeated the ECB's standard formula that intervention was a tool at its disposal, and added: "It is, of course, natural that current foreign exchange developments will be discussed on the coming weekend in Prague."

He said the euro's decline "raised questions about the viability and the longer-run success of the euro", but that he thought the currency would survive in the long term.

He also suggested euro-zone governments needed to improve their economic co-operation and implement more flexible and efficient policies.

Analysts said his comments reinforced the markets' impression that US policymakers regard the euro's difficulties as largely a euro-zone problem rather than one calling for joint action.

The euro-zone received some mildly encouraging news yesterday when official figures showed a decline in annual inflation to 2.3 per cent last month from 2.4 per cent in July. However, the rate remains above the ECB's target ceiling of 2 per cent a year.

Wim Duisenberg, the ECB president, said last week that inflation might have peaked in July, but many economists suspect rising oil prices might cause the headline rate to go up again this month.

Excluding energy and food prices, the euro-zone's core inflation rate was unchanged at 1.3 per cent last month. Headline rates ranged from 5.7 per cent in Ireland to 1.8 per cent in Germany.