Solbes welcomes euro-dollar parity

The euro is at its highest level against the U.S. dollar since February 2000

MADRID, Spain -- European Monetary Affairs Commissioner Pedro Solbes welcomed the euro's rise against the dollar on Wednesday, saying parity with the U.S. currency would not have an immediate impact on European economies.

The euro gained as much 1.5 percent to around 99.41 cents -- its highest level since February 2000 -- as investors scrambled to sell the dollar amid a sputtering U.S. economic recovery, uneven corporate profits and growing concerns over accounting practices.

The euro was trading around 98.92 at mid-morning in London, and Solbes said the single currency could reach dollar parity by the weekend.

"It is possible, it is something which should not be ruled out," he said in a radio interview on Wednesday.

"But the situation could change if some good news comes out of the United States...and we could once again lose parity. But...it will be the market that defines the price.''

However, Solbes said that while the euro's recent rise could make European exports more expensive, it would not hurt the economies of 12-nation eurozone in the medium-term.

"(This) negative impact is not clear, far from it. In fact I think it is not (negative),'' Solbes said.

His view was shared by German Finance Minister Hans Eichel, who said on Wednesday that a strong currency -- which makes imports less costly -- should convince the European Central Bank to maintain it low interest rate policy.

"A stronger external value for the euro brings us the advantage that we import less inflation," Eichel told reporters in Zinnowitz, Germany.

The U.S. administration has also appeared unconcerned by the dollar's demise against other major currencies.

"The dollar will seek its level based upon market forces and based on whether or not our country can rein in spending, can recover, can revitalise our manufacturing base," President George W. Bush told reporters on Tuesday, ahead of the Group of Eight summit in Canada.

Bush's comments come as Corporate America was gripped by another accounting crisis.

Long distance telephone operator WorldCom revealed on Tuesday it had uncovered improper accounting for almost $4 billion in expenses and would restate its results. It also said it had fired its chief financial officer and would lay off 17,000 employees. (Full story)

WorldCom is the latest U.S. company to raise accounting concerns. Others have included energy giant Enron and telecom network group Global Crossing.