LONDON -- Europe's half-century quest for unity received a huge boost yesterday as the new single currency, the euro, entered the market fray and opened a potential challenge to the U.S. dollar for world financial dominance.
From Sydney, Australia, to Frankfurt, Germany, to London to New York, the euro was traded officially for the first time, passing its first significant test as a currency to bind 11 European Union countries.
From a starting point of $1.1668, it traded at a high of $1.1877 before falling back to $1.1820 in late European trading. In New York, the euro sold for $1.1830 in late trading. The euro also triggered a stock market surge on the Continent, as shares were quoted in the new currency.
The significant opening signaled the euro's bid for financial respectability as a leading currency. "This isn't just another day at the office," said Graham Bishop, European financial affairs adviser at Salomon Smith Barney. "Everyone knows that something massive has just happened. And there were no shock horrors."
The euro drama was played out on flickering computer screens, in currency trading of- fices and on stock and bond market floors. "Ode to Joy" set to Beethoven's Ninth Symphony and champagne toasts signaled the euro's arrival in Frankfurt, home to the European Central Bank. But in Amsterdam, Dutch Finance Minister Gerrit Zalm was hit with two pies thrown by anti-euro protesters.
Britain, one of four EU countries outside the euro zone, was a focus of euro attention, as workers in London's influential financial district put the finishing touches on preparations that stretched across a frantic holiday weekend.
"We are really pleased to say it was a very smooth ride," said Ed Young, a Barclays Bank spokesman. "It was actually a very light trading day, right across Euroland and beyond. It's the first day back after the Christmas break, and traditionally, you wouldn't expect a vast amount of trading."
European consumers shrugged off the hoopla. Launched Jan. 1, euro bills and coins won't circulate until 2002. Until then, consumers can open euro bank accounts and use euro-denominated credit and debit cards. Shops across Euroland are beginning to post their prices in euros.
But make no mistake, the euro trading debut was a milestone for Euroland's architects and a reminder that the days are numbered for cash such as German marks and French francs. The euro zone, with nearly 300 million people, includes Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.
Even as they bring their countries closer, Europe's leaders intend to become world economic players.
"With the euro, Europe will have its own voice on the international scene," Yves-Thibault de Silguy, EU commissioner for monetary affairs, said in Frankfurt.
German Chancellor Gerhard Schroeder said the euro provided "friendly" competition to established currencies. Euroland's founders remain hopeful that the euro will become a leading reserve currency. They are trying to create a balance between the dollar, which accounts for 57 percent of reserves held by the world's central banks, and the Japanese yen.
"The euro should slowly gain quite strongly against the dollar, in terms of value of the currency and importance in the global financial system," said Chris Golden, a London-based euro analyst. "Central banks will diversify."
"It is not a question of liking or loathing the euro," said Nick Parsons, chief currency strategist at investment bank Paribas.
"Investors simply do not have enough of the currency in their pockets and are being forced to buy," Parsons told Britain's Press Association.
Most analysts said it would take years for the euro to overtake the dollar as the world's premier currency. But in the short term, they expect the euro to continue to rise against the dollar, a move that could hinder Euroland exports.
U.S. officials have tried to keep a low profile during the euro's creation, welcoming the currency as a tool that could enhance global trade.
"It will be a currency like all other currencies," U.S. Treasury Secretary Robert E. Rubin said in Washington. "As we've said many, many times, if it's good for Europe, that's good for the U.S. A strong Europe is good for the U.S."
Bishop, of Salomon Smith Barney, said the euro could bolster the economies on both sides of the Atlantic. "If the two largest areas of the world have sound money, that sets the right framework for the rest of the world."
Pub Date: 1/05/99