Excerpt from: Futures and Commodity News
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| October 13, 2006 | | Euro rising in popularity as a foreign currency reserve | The euro is on the rise and moving to challenge the U.S. dollar as the pre-eminent forex reserve currency. The greenback has long revelled in its popularity as a reserve currency, but the euro is fast on its heels. The announcement by Syria a few days ago that it has diversified its forex reserve holdings to include half euros exemplifies the move. Bloomberg reports:
The liquidity and breadth of euro financial markets are fast
approaching those of dollar markets, wrote economists Gabriele
Galati and Philip Wooldridge in a BIS working paper. This prompts
central banks to reconsider the currencies in their reserves.
Countries and individuals use reserve currencies for
international payments, savings, and accounting.
``The euro is eroding some of the advantages that have
historically supported the preeminence of the U.S. dollar as a
reserve currency,'' wrote Galati and Woodridge at the BIS, based
in Basel, Switzerland. ``The euro comes closest to challenging
the dollar in its role as a store of value.'' | | |
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