Euro Special - part V and end
Eurospecial - Euro in international context
As much as the battle for the customers between different markets is still
open, so is the future role of European currency in the triad US Dollar, Yen
and Euro. One thing is very probable: the external stability of Euro will be
less politicized, because the Export trade of Euroland is not very much
higher compared to US. Thus Euro will be less volatile, for instance less
than DM is today. The reevaluations of single European currencies, which
would have no fundamental justification, -which have for instance in the past
time and again hit the DM -, will become less probable (and within EMU
naturally impossible). The increased width, depth and liquidity of European
capital markets will attract international - especially US - investment. The
big US insurance companies have already stocked up their European research
offices. The amount of these inflows, however, is uncertain, because it
depends on the attractiveness of European markets and thus also on the
development of the Euro-Yen and Euro-US$ exchange rate. The IFO-
institute gauges the order of magnitude for these capital inflows to 600 to
800 BUS$.
The inflows practically mean an upward pressure on the Euro. However
because one of the preconditions for the successful start of the monetary
union is also an accurate estimate of the fair value of the three big
currencies, one can not, initially at least, exclude some strong volatility in the
exchange rates. It is clear, however, that the importance of US dollar will
decrease relative to Euro. This however will be a long-term process
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