The euro and the dollar, 1998

There is no immediate prospect for the euro to become an anchor currency outside Central Europe and the Mediterranean. Still, a successful euro could deepen European financial markets and attract more international investment to the euro area. The prospect of substantial portfolio shifts into the euro. however, does not justify forecasts that the new currency will appreciate against the dollar over an extended time horizon. Liability managers outside the euro area should also find the enhanced liquidity and improved diversification possibilities of euro-denominated debt attractive.