US politics gives euro’s global use a boost

frankfurt — The global use of the euro currency surged from record lows last year, mostly on a flight from the dollar due to the volatility of American politics and concerns about rising US interest rates, the European Central Bank said on Thursday.

Demand for the euro, the world’s second most widelyused currency after the dollar, fell to historic lows over the past decade. Its rebound suggests both concerns about US politics and growing confidence about the future of the eurozone, which survived its biggest test yet during its debt crisis.

The euro’s share in global foreign exchange reserves, debt issuance and deposits and outstanding loans all increased while its role as an invoicing currency remained broadly stable, the ECB said.

“It’s primarily a diversification away from the dollar, which benefits the euro,” ECB board member Benoit Coeure said in the presentation of the report, adding that visible progress in reforms and growing prosperity even on the bloc’s periphery added to demand for the euro.

In global foreign exchange reserves, the euro’s share rose by 1.2 percentage points to 20.7 per cent. While this is well behind the dollar’s 61.7 per cent, it is a historic low for the US currency.

Although the dollar remains by far the most widely used currency in the world, its market share has been on a steady decline over the past decade as countries diversify into smaller currencies, including the Japanese yen and China’s renminbi.

“Tentative evidence suggests that concerns about unilateral [US] sanctions may have been another factor supporting diversification of the reserve portfolios of some central banks, such as the Central Bank of Russia,” the ECB said. —