ECB will watch impact of strengthening euro on prices - Draghi

FRANKFURT Thu Feb 7, 2013 9:04am EST

FRANKFURT Feb 7 (Reuters) - The European Central Bank will watch to see whether the appreciating euro will change its inflation projections, ECB President Mario Draghi said on Thursday.

Noting that the currency's recent strengthening on foreign exchange markets was a sign of renewed confidence in the euro, Draghi told a news conference:

"We will certainly want to see whether the appreciation, if sustained, will alter our risk assessment as far as price stability is concerned."

Contained inflation has allowed the ECB to keep interest rates low. The bank earlier left its main interest rate unchanged at 0.75 percent.

French President Francois Hollande said on Tuesday the euro zone must develop an exchange rate policy to protect the currency from "irrational movements". The euro has risen this year to a 14-month peak against the dollar.

A stronger euro holds down costs of imported goods but makes exporting harder.

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