Dp Money: European Monetary Unit

Article excerpt

WHILST it is far too early to decide whether the euro - the European monetary unit - has been a success or not, the early signs are encouraging.

It has been nearly eight months since the introduction of the euro as a hard currency at the turn of the year and some 3 1 /2 years since its initial launch as a single currency.

Whilst they traded in tandem for three months or so the French franc, Italian lira and even the mighty German mark have all now been consigned to the history book.

When launched, most felt that the euro, plagued by political and economic issues, would always remain weak and certainly play ``second fiddle'' to the mighty dollar. Since launched in January, 1999 at $1.165, the euro has been on an almost constant slide, spending most of its 3 1 /2 year life worth less than $1 and reaching a low in October ,2000 of 82.72 cents.

But something strange has been happening over recent months. The Japanese, who have long been happy funding the American twin trade and budget deficits, have been selling dollars and buying Euro's. Eastern Europeans, who have used dollars as the currency of business, are now dealing in euro's.

Parity between the dollar and the euro - a pipe dream over the past year or so - is now a reality again. So, what has been happening? Is this the start of long term rally in the euro or simply a short term blip for the dollar?

Although the eurozone economies have been significantly affected by the slump in global demand and are looking to the United States to

lead the recovery, economic indicators continue to suggest that the worst for the region is now in the past. …