All about business

French Finance Minister Christine Lagarde said she wants policy makers to seek a stronger U.S. dollar and Chinese yuan against the euro.

“I would arm twist whoever is holding these strings to pull the dollar up,'' Lagarde said in an interview with Bloomberg News in Chicago. “I would like to do that for the yuan as well.''

European officials including Lagarde are concerned that the strength of the euro against the dollar and the yuan would hurt the competitiveness of their exporters. Even after the dollar tumbled around 17 percent versus the euro in the past 12 months, Europe's economy has shown resilience to the U.S. housing recession that pushed up borrowing costs worldwide.

“It's difficult to say the dollar and the yuan are causing Europe extreme pain, because European economies are doing fairly well and a strong euro does help contain inflation,'' said Kengo Suzuki, currency strategist at Shinko Securities Co. in Tokyo. “Some European officials may prefer a weaker euro and lower commodity prices, but that's unlikely to happen soon.''

The dollar traded at $1.5728 as of 12:10 p.m. in Tokyo and touched a record low of $1.6019 on April 22.

Gross domestic product in the 15 euro countries increased 0.7 percent from the fourth quarter, more than economists expected. France, the euro region's second-largest economy, is set to grow between 1.7 percent and 2 percent this year after expanding faster than economists expected in the first quarter.

Group of Eight

The Group of Eight finance ministers, who meet next month in Osaka, Japan, are “determined'' to stabilize financial markets by the end of the year, and to be better prepared to avert future crises, Lagarde, 52, said. There is a “joint determination'' among policy makers to avoid too much volatility in currency markets, she said cash advance today.

On May 14, when the euro was trading at $1.55, Lagarde said the European currency was “still at 10 percent, 15 percent, 20 percent above the appropriate fundamentals.''

“Lagarde's point over the last couple of days is she's realizing that the euro is strong not just against the U.S. dollar but also against the yuan, so it's a double whammy,'' said Tony Morriss, a currency strategist at Australia & New Zealand Banking Group Ltd. in Sydney.

The yuan has fallen 6 percent versus the euro in the past year and traded at 10.9154 against the single European currency at 11:14 a.m. in Shanghai. In the past month it has gained 1.8 percent against the euro.

Trade Imbalances

China is being more responsive than ever to European concerns about trade imbalances, EU trade chief Peter Mandelson said on April 25 after talks in Beijing. China is allowing the yuan to move more with reference to a basket of major currencies including the euro to fend off criticism from Europe, its top trading partner, according to Merrill Lynch & Co.

There's “good news'' about France's economy despite record low consumer confidence and protests today over a government plan to toughen pension rules, Lagarde said.

“We have got good stories to tell,'' she said. “We are going through such a huge process of reform and major changes to improve the economy of France that it should be more attractive than it has been for the past two years.''

Lagarde is in Chicago to meet investors and promote President Nicolas Sarkozy's economic reform plans.

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