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Currency war talk caps euro rise

Monday, February 11 14:19:14

The euro hovered just above a two-week low against the dollar while world shares lost ground today, as growing talk of currency wars unsettled investors.

U.S. stock index futures suggested Wall Street may add to its gains from Friday, but low volume and the absence of any major economic news could make trading volatile.

Activity was light across all major markets after the Lunar New Year holiday shut most Asian financial centres, with the focus on an upcoming meeting of euro area finance ministers.

French Finance Minister Pierre Moscovici said the issue of the euro's recent strength would be discussed at the meeting and he called on members of the 17-nation currency bloc to cooperate more closely on exchange rate policy.

The comments come after European Central Bank President Mario Draghi suggested last week that further strength could lead to an interest rate cut. French President Francois Hollande has also urged the euro zone to set an exchange rate target.

"The idea of being interventionist in currencies is not particularly new. But at the moment, because some of the bigger players are at the forefront, it feels like a much more pressing issue for markets," said Daragh Maher, FX strategist at HSBC.

The Group of Seven major industrial nations may be about to add its weight to the debate, with two G20 officials telling Reuters it was considering a statement this week reaffirming a commitment to "market-determined" exchange rates.

The euro edged up 0.2 percent to $1.3390, having touched a two-week low of $1.3325 earlier in Asian trade as it extended a sell-off that has knocked around 2.5 percent from its dollar value since the beginning of February.

The euro made bigger gains against the yen and the British pound, though traders said this was demand from investors keen to buy the single currency after its broad retreat last week. (C ) Reuters