Value of euros in circulation exceeds value of dollars

By Ralph Atkins
Financial Times, London
Wednesday, December 27, 2006

http://www.ft.com/cms/s/18338034-95ec-11db-9976-0000779e2340.html

The US dollar bill's standing as the world's favourite form of cash is being usurped by the 5-year-old euro.

The value of euro notes in circulation is this month likely to exceed the value of circulating dollar notes, according to calculations by the Financial Times. Converted at Wednesday's exchange rates, the euro took the lead in October.

The figures highlight the remarkable growth in euro notes since their launch on January 1, 2002, three years after the start of Europe's monetary union, which in January welcomes its 13th member -- Slovenia, the former Yugoslav republic.

"After the launch, we expected growth to stabilise -- but it has continued over five years," Antti Heinonen, head of the European Central Bank's bank notes directorate, told the Financial Times.

Although the ECB does not deliberately promote the international use of the euro, it has become popular in official foreign exchange reserves -- even if it is far from challenging the dollar's lead as the most popular reserve currency.

News that euro notes are challenging the dollar may cheer eurozone politicians -- even if it partly reflects the currency's strength -- but it may have a dark side too. Fast growth in the highest denomination notes, especially the E500 note, has raised suspicions that they are popular among criminals, although the ECB plays down this factor.

By the end of October the $759 billion of US dollar notes in circulation was only a fraction ahead of the value of euro notes, converted at exchange rates at that time.

But since October the euro has risen strongly against the dollar and this month the value of euro notes has risen to more than E610 billion, or in excess of $800 billion at the latest exchange rates. That level is unlikely to have been beaten by the greenback.

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