Euro may benefit from emrg mkt crisis-US economist
NEW YORK, Sept 23 (Reuters) - One ironic outcome of the recent emerging market crisis may be an increased demand for Europe's new currency, the euro, as investors hope to diversity with caution, a leading academic economist said on Wednesday.
''The demand for euro may actually grow faster,'' Peter Kenen, professor of economics at Princeton University, told a conference about Europe's planned monetary union. Even if emerging markets calm in the future, Kenen said, investors may not wish hold only dollars.
''There could be a rise in euro investments by those wanting safety but unwilling to sacrifice diversity,'' he said.
Emerging markets, once an investment darling, have slumped as Asia's financial crisis has spread to Russia and now envelops Latin America. Some markets have recently recovered somewhat.
Even as global stock markets tumbled, economists have noted that the German mark, has managed to appreciate against the dollar, indicating the new currency will be resilient as well.
Germany, France the Netherlands as well as Belgium, Luxembourg, Finland, Ireland, Austria, Italy, Spain and Portugal are set to adopt the euro on January 1, 1999.
While Kenen expects the monetary union in Europe will make continental markets more attractive, the new currency should not not displace the dollar as the world's most important currency.
Kenen said he expects to see a bi-polar system with the Japanese yen, which has been under considerable pressure recently as Tokyo struggles to revitalize the economy, playing only a small role.
''The role of the yen will be quite limited,'' Kenen said.
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