The Euro is increasingly popular because of its stability.
The euro is closing in on the US dollar as the world’s top currency. The euro represented nearly 36% of global payments in 2017 and is rapidly approaching a 40% share, according to a European Central Bank report. “The euro as a second international currency is without competitors in the international monetary system,” stated ECB President Mario Draghi.
The report on the international role of the euro underscores that its value is determined by the market, and that the euro system neither hinders nor promotes the use of the single currency. Indeed, Draghi stated that the aim of the ECB’s monetary policy isn’t to promote the use of the euro abroad, but to ensure price stability within the eurozone.
According to the report, payments in other currencies—such as British pounds and Japanese yen—remained stable. It also highlighted how political improvements contribute to the liquidity of eurozone financial markets, with the completion of the Banking Union and the Capital Markets Union.
Foreign investments in eurozone companies are at their highest levels since the advent of the single currency in 1999. However, other euro indicators are on the decline, including the proportion of international debt and international deposits denominated in euro, and the unitary share of the central bank’s foreign currency reserves, adjusted for exchange rates.
The Frankfurt Institute noted that the decline in international demand for euro banknotes reflects a number of factors, such as financial innovation, the fall in political uncertainty in areas bordering the eurozone and global efforts to combat tax and financial crime. The growing importance of emerging markets as debt issuers also plays a role. In any case, the ECB has seen signs of broad stabilization in the euro.