The surging euro is confounding critics who once doubted it could rival the US dollar, British pound and Japanese yen -- but Europe's shared currency still annoys some consumers five years after its introduction in cash form.
It has surged in value nearly 14 percent this year to 20-month highs and is about US$0.03 or US$0.04 off its all-time high of US$1.36 in December 2004. It's a strong turnaround from an initial plunge to as low as US$0.82 in 2000.
"When it first started -- and even before it hit markets properly, everyone was very skeptical and negative on the whole thing, and that's exactly the performance we saw," said David Jones, chief currency analyst for CMC Markets. "The last three years has turned it on its head, reaching and then surpassing the 1-1 ratio in 2002 and it has gone from strength to strength."
"That initial negative view is history now," Jones said. "The euro is seen as a strong global currency now."
However, some consumers still grumble about using the euro, with 41 percent of people in the 12-nation euro zone saying they still have difficulties using it, according to a recent Gallup poll for the EU. Many still calculate large purchases in the old currencies.
And having a single currency hasn't closed the growth gap between Europe -- where 1 or 2 percent annual growth constitutes an upswing -- and more dynamic economies in the US and Asia.
But companies and governments can now raise money across borders with their investors no longer facing the risk that stock or bond holdings will be eroded by exchange rate fluctuations. And travelers no longer have to waste time and money at airport exchange booths, or return home with a pocketful of unspendable foreign currency.
The euro -- which was initially introduced on financial markets in 1999 -- has also increasingly gained acceptance as a foreign currency reserve in the coffers of companies and governments from China to the Middle East.
"Indeed, there is the very real possibility that several countries could switch a proportion of their foreign currency reserves out of US dollars over time to the euro," said Howard Archer, chief European economist for Global Insight in London.
According to the IMF, global foreign currency reserves during the first quarter of this year stood at approximately US$4.34 trillion. Of that, the US dollar accounted for 66.3 percent with the euro, the pound and the yen accounting for 24.8 percent, 4 percent and 3.4 percent, respectively.
Last month, China's central bank said it was mulling whether to reduce the weighting of US dollars in its reserves, when Central Bank Governor Zhou Xiaochuan (周小川) said his country was "considering lots of instruments to diversify its foreign exchange reserves."
Archer said other countries have expressed similar sentiment.
"Also potentially significant were indications from the central banks of Qatar, Sweden, Russia and the United Arab Emirates in recent months that they are either diversifying away from the dollar in their foreign-exchange reserves, or considering doing so in the longer term," he said.
Peter Morici, a professor at the University of Maryland School of Business, said the US dollar's supremacy, while vibrant, could suffer because of larger US trade deficits and the urge to diversify.
"The euro is the prime candidate for diversification," he said, but added that Europe's struggles to maintain single-digit growth and high unemployment rates would keep the euro from supplanting the US dollar as the primary reserve currency.
"Moreover, Europe's trade problems with China and trade deficits will grow in the years ahead, casting some doubt on the euro's long-term strength relative to the dollar," Morici said. "Picking the euro over the dollar or vice versa comes down to picking which currency will be stronger two and five years from now. That is a difficult choice to make."
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to