Forex News: The members of the European Union are still holding on to the strong image constantly being projected by Euro despite the crisis. According to the July 10 European Central Bank (ECB) statement, the euro has been successful enough to remain unaffected and untarnished by the euro zone debt crisis. However, the euro zone was not able to do anything to reverse foreign investors’ decision to massively sell their debts that may result to further difficulties for the region’s domestic players.
Based on the yearly review on Euro’s role to the international economy, the ECB stated that the currency’s current share to the world forex portfolio has decreased to 25 percent from the previous year’s 25.4 percent. The current decline in Euro’s popularity can be attributed to the debt crisis in the European region that started in 2010. In 2012, reports from the International Monetary Fund confirm that the debt crisis in the European region continues to worsen.
But the current trends and implications from the aforementioned reports does not in any way cause any real worry for the ECB. While it recognizes the intensification of the debt crisis in the region, it is said to be not enough to tarnish the Euro reputation in the global economy. ECB adds that despite the odds presented by the circumstances, the Euro did not fail to manifest stability and relative resilience.
However, there are marked changes in the behavior of investors in the face of this crisis, according to the ECB-released statement. Most have dumped Greece-issued bonds as well as those that are released by countries with high levels of debts. The rate of overseas holdings that were declined reached a level of almost 4 percent in July to December 2011.
Based on the analysis made by financial and experts in the field of economy, the sudden decrease in the level of foreign interest in the debt securities issued by governments of specific European countries are truly due to the intensification of debt crisis and should not be in anyway be interpreted as the weakening of Euro as a currency. Despite proposals to substitute Euro with the German currency might present more risks than benefits to the economy of the European Union.
In a recent survey facilitated by the ECB, results show that there are shifts in the segments denominated by Euro of portfolios of reserve managers. This results to the increase in weight of Euro region issuers accompanied by stable positions in the fiscal policies. Seventy-eight percent of those who responded in the survey affirmed that the debt crisis experienced by European region has great impacts in the management strategy when it comes to local and foreign reserves.
The report by ECB also made mention of the fact that the rising popularity of China’s Yuan and its increasing importance is a proof that the world economy can give way to three important currencies, not just the conventional two strongholds (USD and EUR).
In conclusion, the report stated that the use of USD and EUR in place of the local currencies has greatly increased the impact and gravity of the worldwide economic crisis that currently crushes the developing economies.