The euro has made a steady debut on the markets, but the new currency is set to be affected in the months ahead by talk of lower interest rates and of international currency pacts. The first week of trading in the euro was quiet for the most part, as traders sat back to check how it would operate. Later in the week initial gains were lost as the Japanese yen powered ahead.

On Wednesday, there was a flurry of activity as rumours circulated about problems with Target, the new real-time cross-border payment system for the euro zone, while yesterday European Central Bank president Mr Wim Duisenberg said euro zone interest rates could move, but not at the next meeting of the the ECB's policy-making governing council. Speculation about further reductions is bound to build.

While talk of lower interest rates will grow in the months ahead, another intriguing possibility is a serious international discussion on measures to control the movement of the euro, the dollar and the yen exchange rates against each other. In a move which could cause consternation on foreign exchange markets, Japan's Prime Minister, Mr Keizo Obuchi, called for greater three-way co-operation with Europe and the US to contain damaging swings in currency exchange rates after the launch of the euro.

The German finance ministry refused to comment on the declarations, but said a text on stabilising the world monetary system was "in preparation".

Mr Obuchi, meeting leaders in France on a European tour, said the euro opened "a new page in world history" which required greater co-ordination between the world's main economic powers.

The French President, Mr Jacques Chirac, echoed Mr Obuchi's message later in the day, calling for "real concentration" within the Group of Seven leading industrial countries to reduce fluctuations between the dollar, the euro and the yen. Italian Treasury Minister Mr Carlo Azeglio Ciampi said Europe should monitor euro fluctuations against the dollar and yen.

Mr Chirac and Mr Obuchi were expected to issue a statement pushing for progress on reforms of the international monetary system to try to ward off the kind of financial and economic crisis which spilled out of Asia this year.

"If Europe and Japan and also the US co-operate, it will be possible to build a stable international currency regime. We must co-operate towards that goal," Mr Obuchi said in a speech to French businessmen.

Meanwhile, the euro made up some of the losses which it had suffered against the US dollar on Wednesday. The ECB and the Bundesbank both declined to comment on press reports that there had been problems with Target. "These are market rumours and we have no comment to make," an ECB spokesman said.

The Target system, launched on Monday, was developed by the ECB and the national central banks of the 15 EU countries as a secure and efficient way of settling cross-border payments in euros.

The ECB claimed confidently on Monday that Target was up and running as planned. But money traders around Europe have complained of minor glitches in recent days.

And foreign exchange traders in New York on Wednesday even attributed a decline in the euro to indications that European central banks, notably the French and Spanish, were encountering technical problems in settling transactions with the ECB.

But Mr Jim Power, chief economist at Bank of Ireland, said the flow of funds into the dollar as Wall Street hit record highs was also probably responsible for the fall in the euro's value.

The euro fell to $1.1555 dollars early on Wednesday but had recovered again yesterday, closing at $1.1662. That is still well below its closing levels on Monday at $1.809.

The yen powered to a 27-month high against the dollar and beat the euro to its lowest level since its birth at the beginning of the week at 129.99 from 133.39 at Monday's close, on renewed worry about Brazilian debt and President Clinton's impeachment hearing. These factors - and some profit-taking - also combined to knock the "euro-phoria" out of international equity markets.