The euro has continued to climb as expectations build of an interest rate rise next week, combined with a call by France for some co-ordination among euro members in supporting the currency.
French prime minister, Mr Lionel Jospin, called for accountability from the European Central Bank. However, ECB president, Mr Wim Duisenberg, said the bank bases its strategy for management of the euro zone on complex factors and any attempt to express it in simplistic terms would be misleading.
Mr Duisenberg warned that the bank was navigating in "a complex, uncertain and changing environment".
He was addressing a meeting of central bankers marking the 200th anniversary of the Bank of France at which Mr Jospin argued strongly for political input into the euro zone policy framework and that the ECB should be accountable.
Mr Jospin also suggested that the euro requires "joint action" by the ECB and the 11 countries in the euro zone to support the currency.
"Current developments in the euro, which do not satisfy me fully even if it fortunately staged a rebound in recent days, call for joint reflection and maybe even join action by the ECB and €11, as well as better co-ordination between major monetary zones," he said. He added that co-operation between monetary and political leaders was particularly important on exchange rates.
Following the comments the euro closed at $0.9325, having traded as high as $0.9410 from $9277 on Monday, and at 62.30p against sterling from 62.20p. As a result the pound closed at 79.10p against sterling from 78.98p.
According to Mr Jim Power, chief economist at Bank of Ireland, sentiment towards the currency is still looking positive. "It is possible we will see it hit $0.95. But its ability to go beyond that is still in question.
"It is too early to get carried away we have seen these sort of bounces before, although the omens do appear to be better this time," he warned.
The single currency, which rose 4 percent last week, has rebounded from an all-time low of 88.50 cents on May 19th.
Data which suggested that the German economy is recovering well and French confidence is on an upswing also boosted the currency. According to Mr Power, the German gross domestic product data suggests the recovery may be more deeply ingrained in Germany than many analysts had assumed.
Expectation of an interest rate rise next Thursday from 3.75 per cent is also expected to continue underpinning the currency.
The US jobs report on Friday will be vital for the short term direction of the euro, despite a likely rate rise next Thursday. One of the factors which pushed the currency back slightly yesterday afternoon was surprising US consumer confidence.
US consumer confidence jumped from 137.7 in April to 144.4 in May. According to Mr Power this was quite surprising against the background of equity market weakness last month.
"The US consumer is still proving resilient to equity market weakness and is keeping on spending."
But European data was also positive for the euro. The German economy grew 0.7 per cent in the first three months to an annual rate of expansion of 2.3 per cent.
This follows an increase in business confidence over the past several months. In April, the Ifo research institute found that German executives were more upbeat than they'd been in nine years.
The German labour market is starting to benefit from the economic recovery, which is good news for the government of chancellor Gerhard Schroeder, which won an election on a platform of reducing joblessness.
The jobless rate declined to a four-year low of 9.6 per cent in April.
The economy is likely to expand 2.8 per cent this year, the quickest pace in eight years and up from 1.5 per cent in 1999, according to the nation's six leading research institutes.
