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Euro ‘unchallenged’ as second currency, ECB says, but still far from top slot

The euro remains far from achieving one of the chief aims of its political founders: to challenge the dollar as the sole global currency.

The European Central Bank, said on Wednesday that the euro was “unchallenged as the second most used currency”. However, the gap between it and the greenback remains yawning.

Reserve managers at central banks are responsible for investing more than $10.8trn of their institutions’ money. But last year, just under 20 per cent of that was held in assets denominated in euros, against more than 60 per cent in dollars. The pick-up for the euro last year was just 0.3 percentage points, rising to 19.7 per cent from 2017.

As a share of international loans and trade in foreign exchange markets, the euro’s role in international finance waned, accounting for a smaller proportion of activity in these markets. There is also much less euro-denominated debt than before the financial crisis.

The ECB blamed the performance on political risks, with Benoît Cœuré, a member of its executive board, saying he expected a turnround in 2017.