With the increasingly weak dollar, a new protagonist is entering the scene of the refuge assets: it is euro. The single currency is starting to become more and more central in the global currency market, while among the operators the temptation to circumvent the dollar, penalized by the unprejisable US commercial policy.
The euro grows
According to data from the Trust & Clearing Corporation Depository, in the first five months of the year there was a significant change in the trading volumes: about the 15-30% Contracts related to the US dollar has been converted into euros. This is how the signals that indicate how the euro is gradually assuming the role of refuge, a function historically attributed to the dollar from the second half of the twentieth century are multiplying.
Although the green ticket continues to dominate the global currency market – with a daily volume of transactions equal to 7,500 billion Dollars – The figures highlight a growing competitive pressure on the green ticket as the main international reserve currency. In this scenario, the euro emerges as the main beneficiary, also supported by a European context full of public economic stimuli.
Since the beginning of the year, the single currency has gained the11% compared to the dollarexceeding 1.16 and reaching the highest level from 2021. At the same time, the second has lost ground not only against the euro, but also compared to the other main currencies, with a total index falling over 7%, at the minimum from 2022.
The weight of the single currency
Currently the euro represents about the 20% of the world evaluation reserves, a share still far from 58% detained by the dollar, but not considered unattainable. A strengthening of the international role of the single currency would bring concrete benefits: lower financing costs for states and companies, greater protection from extraterritorial sanctions imposed by third countries, and a significant reduction in dependence on external monetary policies.
The president of the European Central Bank, Christine Lagarde, has caught the moment with a clear and determined message, launched by the pages of the Financial Times: “This is the hour of theglobal euro“. The current context seems to give it reason; in a world increasingly marked by protectionism, decline in multilateralism and geopolitical fragmentation, the European Union has the opportunity to assume a central strategic role also on the currency front.
Dollar in crisis
The US dollar is suffering from the increase in concerns for a possible recession in the United States, the growing distrust by investors in the stability of the American economy under the guidance of Donald Trump, and uncertainty on the next decisions of the administration on duties. To these factors are added the outflow of capital to the most stable international markets and the progressive weakening of the status of the dollar as a refuge currency.
A weaker green ticket can have positive effects onAmerican economymaking exports more competitive and potentially stimulating growth. In addition, it can translate into major profits for multinationals with a strong presence abroad.
However, a weak dollar also involves an increase in costs for imports. In theory, this should encourage greater internal production. But, at present, the United States do not have a manufacturing base solid enough to compensate the reduction of imports. According to the Department of Commerce, in 2023 only just over half of the goods and services consumed in the country was produced at national level.
