How the Euro's Challenge to US Dollar Will Affect Americans

A single European currency will become the most serious competitor to the American dollar since early this century, a panel of experts warned Congress.

But, the panelists told a House subcommittee on Tuesday, the United States will still enjoy a number of benefits because of the dollar's status as the world's leading reserve currency.

The benefits include the ability to use dollars to buy oil, the ability to run a large trade deficit without excessive worries about a drop in the currency, and the attractiveness of the US stock and bond markets to international investors.

But the panelists said the new currency could bring changes over time.

"At most, the euro might come to play a role that is equal to that of the dollar," said C. Randall Henning, associate professor at American University. However, he said that the emergence of a "robust alternative" to the dollar may mean international investors may hold US economic policymakers to a higher standard. He said the US stock and bond markets, for example, might become more vulnerable to big sell-offs in the event of mistakes such as excessive budget deficits.

Jill Considine, president of the New York Clearing House Association, noted if oil prices were no longer to be priced only in dollars, it could mean average American consumers might need to be more sensitive to exchange rates.

Klaus Friedrich, chief economist at Dresdner Bank Group, said the US stock market is more than three times larger than the stock market of the 11 countries headed for monetary union, but the end of currency volatility risk would probably make European equities more attractive.

About these ads
Sponsored Content by LockerDome

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK