ECB concerned about excessive FX moves: Trichet

By Sven Egenter and Natsuko Waki

BASEL, Switzerland (Reuters) - European Central Bank President Jean-Claude Trichet said on Monday that the bank is currently concerned about excessive movements in currency exchange rates which are undesirable for economic growth.

Trichet also said after talks with other central bank governors that policymakers must stay alert and anchor inflation expectations in a highly volatile financial market which is undergoing a correction.

In remarks which pushed the euro sharply lower against the dollar, Trichet noted that the U.S. policy of favoring a strong dollar. "Excessive volatility and disorderly movement in exchange rates are undesirable for economic growth," he told a news conference, stressing that he was speaking as ECB chief rather than summing up Monday's meeting in Basel.

"In present circumstances we are concerned about excessive exchange rate moves," he said. "I have noted with extreme attention the statement of the U.S. authorities reaffirming that a strong dollar is in the interest of the U.S. economy."

The euro has soared against the dollar over the past week, hitting an all-time high near $1.5460 as fears of a U.S. recession and more Federal Reserve interest rate cuts grew. The euro has risen 5.2 percent against the dollar since the start of the year.

ON ALERT

Summing up talks among central bank officials from developed and emerging economies, Trichet -- chairman of the bi-monthly Global Economy Meeting -- said a significant market correction with high volatility was persisting.

"At a global level, the alertness of central banks was very important, as always but of course also in present circumstances," Trichet said.