The euro is suffering from another bout of weakness. The currency dropped to 89.10 US cents in European trading Wednesday, just about a half a cent above its all-time low of 88.45 cents set in May. In morning European trading Thursday, the euro was quoted at 90.09 cents.

Politicians are playing down the threat of inflation, and industry groups are already crying about higher interest rates. Hans Eichel, the German finance minister, said he saw no inflationary dangers in Germany and called for calm about the euro's recent fall. "The inflation rate is going down," he said in Berlin. "If you strip out oil price increases, there is no threat to stable prices in Germany." Consumer price inflation in three large German states slowed in August 0.1 per cent from the previous month, and a slowdown in annual rates could lead to a slight decline in annual inflation from 1.9 per cent in July. Germany's Federal Statistics Office said Thursday that producer prices rose faster than expected in July, up 0.7 per cent from June and 3.3 per cent from July 1999, the highest annual rate in nine years.

Head of the Association of German Whole salers and Exporters, Michael Fuchs, said on public radio that the German economy isn't strong enough to sustain a rate rise. A slowdown in the US could hamper demand for European products, he said. The US, behind the United Kingdom, is the euro zone's second-largest outlet, taking in 13.4% of all exports. The German economy, which forms a third of the euro-zone, is still fragile, he said. Indeed, a business sentiment survey published Tuesday by the Ifo economic think tank showed that businesses haven't been so pessimistic since last November.But the ECB remains on guard. Otmar Issing, the influential executive board member of the ECB and the bank's chief economist, said that factors some consider evidence of a significant economic cooling are actually signs of a "slowdown of the expansion."

-- (The Wall Street Journal)