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Currency rally threatens eurozone recovery

The euro has experienced a rally, trading above $1.40 for the first time since February on continued worries over the US economy.

A spokesman for the European Commission said the rise of the euro yesterday was 'disproportionate' and could affect economic recovery across the zone.

However, the euro later fell back as the US dollar rallied, and the single currency stood at $1.3920 last night. EC spokesman Amadeu Altafaj said: "We consider that the euro is currently bearing a disproportionate burden in the adjustment of the global exchange rate. This may affect the European economy's recovery."

Mr Altafaj also said China's yuan was 'still significantly undervalued'. The euro's latest rise came as the dollar reached a 15-year low against the yen on persistent concern about the US economic outlook. International Monetary Fund head Dominique Straus-Kahn said he took the threat of a currency war 'very seriously' and would try to prevent one.

His comments come against a background of concern that countries trying to devalue their currencies to boost exports. The US and Europe accuse China of keeping its currency low to bolster its exports at their expense.

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