SHROFF: EURO
No Love Lost
By Tom Holland
Issue cover-dated January 17, 2002
The euro has had a good couple of weeks. First, the introduction of the European single currency's new banknotes and coins proceeded more smoothly than almost anyone had dared hope, though there were some minor glitches. Then, demand for the new cash helped spur a rise in the euro's value on the world's foreign-exchange markets. Finally, it won an important commendation from China's finance minister, who reiterated Beijing's intention to convert part of its huge foreign-exchange reserves from United States dollars into euros, sparking yet more euro-buying in international markets.
Yet despite all of the fanfare, Asian governments and businesses remain distinctly unimpressed. Asia's is still a dollar-loving economy. Government and central-bank reserves are held overwhelmingly in dollars, countries with fixed-exchange rates peg their currencies to the dollar, the region's trade with itself and the rest of the world is denominated in dollars, and when Asians borrow or invest in currencies other than their own, they do so in U.S. dollars, not euros. None of those dollar habits is going to be broken any time soon.
[snip]
feer.com |
