Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Countdown To The Euro: Euro expected to displace dollar

Clifford German
Sunday 27 December 1998 19:02 EST
Comments

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

THE EUROPEAN single currency is expected to appreciate by as much as 10 per cent against the US dollar in its first year of operation. Central banks, especially in Asia and Latin America, will take the first opportunity for decades to diversify reserves by selling dollars and switching reserves into euros, although European interest rates are below US levels.

A report from the Centre for Economics and Business Research due later this week claims that China alone has more than $100bn in its reserves and is already on record as wanting to switch to a bi-polar reserve policy. Japan, the world's biggest holder of dollars, might also diversify into euros. It has suffered recurring heavy exchange rate losses over the years as the dollar has depreciated against the yen.

The euro could also appreciate against the pound, creating a window for the UK to join the European single currency at a lower and more realistic rate than the current 70p - and give UK exporters one final shot in the arm before currencies are fixed permanently.

Upward pressure on the euro as central bankers buy the currency will increase deflationary pressures on European economies, though, as the rising exchange rate prices EU producers out of world markets.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in