Many played down the risk of a weakened euro resulting from the European Union summit decision at the weekend that put Dutchman Wim Duisenberg in the top job on the understanding that he would step down after four years.

His early departure, which was described as voluntary, would allow Bank of France governor Jean-Claude Trichet to take over, appeasing demands that a Frenchman should be in charge of the powerful bank.

"(The decision) is not good for the reputation of the euro. Whether it's good or bad for the external value is a separate question," said Holger Schmeiding, economist at Merrill Lynch in Frankfurt.

The one way it could affect the euro's value is if the ECB were to take a more hardline stance on interest rate policy in order to bolster its reputation and credibility with financial markets.

"This veryfact raises the risk the... ECB may have to prove its credentials with rate hikes that come earlier than expected," Schmeiding added.

Guenther Thumann, economist at Salomon Smith Barney, agreed. "It could be that the ECB will have to be tougher and establish its credibility with a bang," Thumann said. "That risk has gone up." But whether such toughness actually comes to pass will depend on market perceptions. Several economists said it was likely that the weekend's events would fade in memory relatively soon, diminishing the need for extra toughness by the ECB.

Moreover, economists noted that the euro's value against the dollar and other currencies would be heavily influenced by economic conditions in Europe and elsewhere, not to mention inflation, portfolio shifts in and out of the euro area, and unemployment levels.

All of these factors are highly unpredictable, making any hard and fast forecasts for the euro and the influence of political decisions even more hazardous. The interplay between politicsand monetary policy could, however, come into sharper focus once the euro area suffers an economic slowdown. Relations between the ECB and the so-called Euro-XI council, a powerful new club which will co-ordinate economic policy among the 11 euro states, will be closely watched in this regard. "The real test will come when there is an economic downturn," said Malcolm Levitt, EU adviser at Barclays Plc. "You need to see a central bank in action during one full business cycle."

The major benefit the EMU process currently enjoys is an upswing in economic activity across the bloc, with low inflation and budgets more or less in balance. But once economic conditions deteriorate, the ECB and its adherence to price stability will probably be tested.