"It is true that the euro is close to its historic highs in real effective terms, but it is also true that the euro-area current account is in broad balance," de Rato said, adding that the pan-European currency was in line with medium-term fundamentals on a multilateral basis.

Earlier in the week, de Rato had told the media that the dollar was "overvalued" and needed to fall further. This reversed earlier comments that he had made. The US currency, continuing its retreat, hit a record low against the euro on Thursday.

But most European financial and business leaders are at odds with the drop in the dollar, and believe their economies are bearing the brunt of the greenback''s decline. President of the European Central Bank Jean-Claude Trichet has said he is paying "great attention" to American statements in support of a strong dollar.

US treasury secretary Henry Paulson said earlier this week that a strong dollar "is in our nation''s interest", adding that "currency values should be determined in competitive markets, based on underlying economic fundamentals".

But de Rato''s comments effectively mean the G-7, the group of seven leading industrialised nations - which has urged China to accelerate the appreciation of its currency - will not intervene to stop the dollar''s decline. The dollar''s decline has badly hurt European exports, but it is helping to lower the US trade deficit, a key source of global instability.