Euro vs. dollar: which one will win?

Financial analysts predicted several months ago that the euro might overtake the dollar; moreover, not only financial experts but even ordinary people thought that it might happen. Now, when the euro has approached the dollar, people are thinking more and more whether or bot it would be wiser to exchange their dollar savings into euros.

However, Russian government officials and bank representatives say, it is not time now to do exchange. Alexei Volin, second in charge of the Russian government staff, recommends not to make haste about the exchange. In an interview to RIA Novosti Volin said, “The mass exchange of dollars for euros would be a major mistake.”

Spokespersons for Russian banks support this opinion. Head of the conjuncture and analytics department with Rosbank, Valery Petrov says that there is no reason to make haste to exchange dollars for euros, because no negative changes have been fixed in the US economy even despite the scandals about financial accountability of American largest companies. Valery Petrov’s advice for those people who are extremely cautious is to keep their savings in a 50 to 50 ratio (50% in dollars and 50% - in euro). This measure will reduce inflation risks and increase the liquidity of savings (especially because the demand for both currencies is stable now).

The euro growth is a natural result of the macroeconomic situation in the USA and European Union. At the time when the rate of the US economy growth has become weaker after the Sept.11 terrorism attacks, the EU, on the contrary, is experiencing growth. However, it is not correct to say that the European economy is much ahead of the US economy. It is time to think now how long the parity may last. Valery Petrov thinks that the parity is likely to within the nearest future, because it is favorable for both: the USA and European Union.

The dollar's collapse will stimulate the development of the US economy (the same occurred in Russia after the 1998 default). Now, the European Union will need to pay less for raw materials, because the prices for the materials are fixed in dollars (they have been fixed in dollars until now, at least). The euro's increase will inevitably influence the Russian economy. On the one hand, the majority of Russian exporters keep accounts in dollars, but the majority of addressees of Russian exports are in Europe. Thus, customs duties are calculated euros. This means that exporting companies may bear losses in currency conversion. On the other hand, the euro's strengthening entails an increasing number of euro accounts opened by Russian companies; this fact reveals a high degree of trust in the currency. In addition, the dollar will not lose much, because payments between countries outside the EU zone are settled in dollars. These countries do not reveal any decline in trust in the US dollar.

Therefore, there is no reason for people to worry too much about the dollar's collapse and the euro's increase. Tourists leaving for Europe are recommended to buy euro, and that is all. Owners of currency exchange offices say that the demand for the euro has increased, but it is mostly connected with the travel season. People still prefer to exchange their savings for dollars.

Oleg Artyukov PRAVDA.Ru

Translated by Maria Gousseva

Read the original in Russian: http://www.pravda.ru/main/2002/07/16/44215.html

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