BERLIN -- In an attempt to strengthen the euro's nascent recovery, the
European Central Bank
said Friday it had once again intervened in the foreign exchange markets to boost the value of the battered currency.
After touching all-time lows below $0.83 last week, the euro had staged a modest comeback in recent days as the U.S. economy began to show signs of cooling. Apparently hoping to cement the euro's recovery while it has a tailwind, the ECB took action without the cooperation of other world central banks, most notably the U.S.
"The ECB has intervened today in the foreign exchange market owing to its concern about the global and domestic repercussions of the exchange rate of the euro, including its impact on price stability. The ECB confirms its view that the external value of the euro does not reflect the favorable conditions of the euro area," the bank said in a statement.
Some observers had begun to fear a nasty scenario in which the ECB would choke off European growth as it was forced to raise interest rates to stem the inflationary effects of the weak euro. Friday's intervention helps ease the need for further rate hikes; however, the euro is still widely considered heavily undervalued, increasing the risk of importing inflation from abroad. On Thursday, the ECB left its main refinancing rate unchanged at 4.75%.
After the intervention, the euro was trading higher at $0.8706. Whether the euro's recovery will continue -- especially without support from the Fed and
Bank of Japan
-- remains to be seen. The world's most powerful central banks last intervened on behalf of the euro Sept. 22.
The ECB sets monetary policy for Germany, France, Italy, Spain, Portugal, the Netherlands, Belgium, Finland, Luxembourg, Ireland and Austria.