We will continue to monitor developments closely and to cooperate in exchange markets as appropriate

G7 finance ministers

On Friday the world's leading central banks launched a surprise intervention to boost the euro, the single currency of 11 EU countries, to try and halt the 30% slide in its value since it was launched in January 1999.

The head of the European Central Bank, Wim Duisenberg, said that the G7 countries had decided to work together to stabilise the euro "because of a shared concern ..about the potential impact of recent movements in the euro for the world economy."

He said that there was agreement that recent movements "have gone further than can be justified by the economic fundamentals" and said his objective was an "orderly reversal of this trend."

And he added that "the instrument of intervention remains in our arsenal," and he did not need any authorisation from EU finance ministers to use it again.

US role the key

Mr Duisenberg revealed he had spoken to Alan Greenspan, the head of the US central bank, the Federal Resave, the day before the intervention.

Coordination with the United States played a key role in convincing the currency markets of the G7 's determination to prop up the euro, but there is still confusion over their ultimate goal.

US Treasury Secretary Larry Summers said on Friday that the US was sticking to its policy of a strong dollar, which immediately caused the euro to weaken again.

But Mr Duisenberg denied there was a conflict between the two objectives.

"The US thinks a strong dollar is in the interests of the US and equally Europe thinks a strong euro is in the interests of Europe-and we can live together," he said.

That suggests that the aim of the intervention was mainly to stabilise the euro and prevent it falling further, rather than increase its value.

That view was broadly confirmed by the governor of the Bank of England, Eddie George.

"It (the euro) is clearly undervalued against everything but we did not have a view about what the appropriate rate should be," Mr George said after the G7 meeting.

UK Chancellor Gordon Brown said that it was too early to tell whether the intervention had been a success, but he stressed all seven countries had endorsed the move.

"Intervention has to be co-ordinated to be effective and all the G7 were agreed on it," he said.

The Limits of Coordination

It was widely reported that Mr Summers had finally agreed to help boost the euro because of the collapse of US company profits in Europe, which has led to a sharp stock market sell-off.

The high value of the dollar against the euro makes US goods more expensive in Europe, and has been hurting their sales.

However, the US has only intervened once before during the Clinton administration in the currency markets, to boost the Japanese yen when fears about delays to economic reform caused it to slide to record lows.

In previous decades currency coordination was more widespread, especially in the l980s, when the world's central banks intervened to lower the value of the dollar in the so-called Plaza Agreement, named after the New York hotel where it was negotiated.

And at least one influential group, the Institute for International Finance, which represents the world's commercial banks, believes that the G7 need to go much further this time to lower the value of the dollar in a controlled fashion.

In a letter to Gordon Brown, who chairs the main IMF policy-making committee, the bankers warn of the "risk of a sharp fall in activity associated with abrupt exchange rate changes" which could put upward pressure on interest rates at a crucial time for the world economy.