A weak euro could make life easier for Europe's exporters

The comments came from Michael Deppler, director of the IMF's European department, as the euro remained near eight-month lows against the dollar.

While the euro stayed at about the $1.23 level on Tuesday, Mr Deppler said somewhere between $1.20 and $1.30 was "about right" for the currency.

The euro has fallen amid political and economic uncertainty in Europe.

'Uncertain outlook'

Mr Deppler added that he thought the eurozone's current level of interest rates, 2%, was fine for the moment, but it might be necessary to cut rates if Europe's economy fails to pick up in the third quarter of this year.

We will continue to look very carefully at all the data that we will have, but I am not preparing for a rate cut ECB boss Jean-Claude Trichet

His comments echoed an earlier statement on the IMF's website.

"Given the outlook for prices and the uncertain situation, keeping [eurozone] interest rates on hold is appropriate, but the need for a rate cut may be materialising," the IMF said.

Mr Deppler also cautioned that the euro could rise if and when the US sought to lower the value of the dollar to aid the reduction of America's trade deficit.

Euro pressures

The euro's recent weakness followed France and the Netherlands' "No" votes on the European Constitution.

Monday's suggestion from Italian ministers that Italy might abandon the euro also hit the single currency.

However, eurozone finance ministers were quick to dismiss the idea, rejecting it as "absurd".

New French foreign minister Philippe Douste-Blazy said the euro was "a plus for European economies".

The euro was further hit by hints from ECB chief economist Otmar Issing that an interest rate cut was a distinct possibility to help boost the sluggish eurozone economies.

Yet this was quickly rejected by the ECB's president Jean-Claude Trichet, who said the bank had no current plans to cut eurozone interest rates from their current 2%.

"We will continue to look very carefully at all the data that we will have, but I am not preparing for a rate cut," said Mr Trichet.