Euro's Steady Start

The value of Europe’s new currency, still crisp in wallets across the continent, was holding steady some 36 hours since its launch as cash and coin.

Fears that currency speculators would bet against the euro in its infant hours proved overblown, as it rose to a two-year high of €0.0084 (Y118.52) against Japan’s yen and showed no major movement against the US dollar.

While the euro’s launch is an epic event expected to dramatically affect international trading and currency markets, it has slipped into circulation with hardly a blip on the screen.

Steadiness was a great relief for the European Central Bank (ECB), which wants public confidence in the currency to build early and endure.

But it is not a great surprise.

No market phenomenon

The euro has already endured pressures of speculation for over two years.

Before January 1, 2002, markets had already determined the euro’s value, and it probably would have taken a catastrophic launch to push the value down dramatically just as it enters circulation.

Instead, the launch went smoothly, with only isolated instances of cash shortfalls, delays and theft.

Since 1998, the euro-zone’s national currencies existed as paper and coin, but officially they were only "denominations" of the common currency.

That meant that exchange rates were fixed throughout the region – a matter of fact for traders, known to few ordinary citizens and understood by still fewer.

During this time, the value fell from about €1.2 to the dollar, to just under €0.90, where it remains today.

The ECB intervened in 2000, and the interest rate cuts it has instated through 2001's economic slump have similarly benefited the euro.

Minor rallies against the dollar in the new year looked to be the sort which fade, and analysts said that gains against the yen had more to do with Japan’s economic downturn than with European success.

Not impervious to risk

European economies competitiveness with the US, especially amid an American downturn, appears to be serving the new currency well.

While the US economy tends to experience trends as a whole, regional variation in economic growth across the euro-zone may prove great enough to hold the currency steadier.

But no currency is impervious to risk, and regional variations could also be the euro's curse.

Some analysts have pointed out that economic competition between euro-zone nations could put stress on the currency, because the euro still retains some national characteristics.

Contrary to appearances, it is not totally "common".

For example, when France trades with Germany, French euros will be exchanged for German ones in an operation made possible by trading systems between central banks.

Speculation against one national euro against another one could, in an extreme case, disrupt this process and threaten common currency policy.

That is the nightmare scenario for Europe's euro-lovers. In theory it could happen.

But in practice, the euro looks great so far. Fears of a catastrophe of logistics or market value, like fears of computer meltdowns on new year's eve 2000, now look more like pop paranoia than anything else.