Euro to challenge U.S. dollar--Deutsche Bank
TOKYO, Aug 25 (Reuters) - The euro will be a challenger to the U.S. dollar as a transaction currency, as a reserve currency and even as an anchor currency, Norbert Walter, chief economist of the Deutsche Bank Group, said on Tuesday.
''Evidence suggests the euro can gain a world market share of about 35 percent over the next 10 years (as a transaction currency),'' Walter told businessmen and reporters at a Tokyo seminar sponsored by the Deutsche Bank Group.
The U.S. dollar had a world market share of about 48 percent in terms of foreign trade invoicing in 1992, Deutsche Bank research figures showed.
''It is very likely that Asian enterprises and countries that are trading partners with Europe will increasingly use the euro for foreign trade and foreign exchange transactions,'' he said.
The euro's share in world currency reserves could also grow to 30 percent over the next five years, he said.
He added that the share of euro reserves can grow only if other countries, including big reserve holders in Asia, begin to diversify their foreign exchange reserves or to use the euro as a matter of foreign exchange policy.
The elimination of currency risk and currency-related transaction costs should lead to the development of a new investment climate and equity culture within the eurozone, he said.
''This will create new opportunities for Asian investors and corporations,'' Walter said.
Overall transaction costs in Europe will decline with the advent of the euro, which will eliminate foreign exchange commissions and costs of cross-border transactions, he said.
This also means severe restructuring of the foreign exchange business and tough labour market conditions for forex traders, he said.
''But, the market economy is to support consumers, not bankers,'' Walter said.
The euro will play an anchor role in Eastern Europe and parts of the Middle East, judging from their trade volume with the eurozone, he said.
Walter predicted the dollar would be around 1.10 euro in January 1999, and about 1.15 euro in July the same year.
He also said Japan and other Asian nations should research the possibility of launching an Asian Monetary Union (AMU) and eventually setting up an institution to spearhead the move.
An AMU is possible in light of the significance of inter-Asian trade and negative effects of the dependence on foreign currencies, he said. |
