Table 5 Non convertible currencies held at 31 December 2004

The Non Crisis of the Euro

It is conceivable, therefore, that Europe will have two currencies, the euro and sterling, in the long run. But having three currencies, much less three dozen, is out of the question.amp 160

The regular resources cash balance at the end of 2004 was 329 million, consisting of 318 million in convertible currencies and 11 million in non convertible currencies.

The equivalent of 1,491,424 ( 1,099,180) is held in currencies classified as non convertible, as follows

Because other global currencies the dollar, the euro, and increasingly the renminbi would continue to coexist with the SDRs as global reserve assets, another essential element of global macroeconomic cooperation should be defining the particular obligations of countries (or regions) issuing reserve currencies.

The euro was expected to acquire an international role, eventually improving Europe s resilience in the face of economic shocks. There has been a surge in euro denominated international bonds, but the liquidity of foreign exchange markets is no higher for the euro compared to the national currencies it replaced, and the euro remains a long way from challenging the supremacy of the dollar.

(b) Payments in currencies other than the euro will be determined on the basis of the operational rate(s) of exchange prevailing at the time of payment.

The American dollar soared, the Japanese yen went into orbit, the euro fell to earth, and the British pound crashed, leaving a giant crater. Emerging market currencies were hammered, as were commodity currencies such as the Canadian, Australian, and New Zealand dollars, and the South African rand.

Table 5 shows details of the United States dollar equivalent of non convertible currencies held at 31 December 2004.

(a) Effective 1 January 2002, the euro should be used as the official currency for those emoluments which are currently set in the national currencies of the twelve euro zone countries, and that the national currency amounts would be converted by applying the respective fixed conversion rates and then rounded up or down to the nearest euro

Depreciation of the euro would be the best medicine for restoring international price competitiveness to the periphery countries and reviving their export sectors. Of course, they would devalue on their own had they not given up their currencies for the euro ten years before the crisis (and if it were not for their euro denominated debt).

The US Federal Reserve, for example, is aggressively cutting interest rates to forestall a possible recession. As a consequence, the euro is rising not only against the US dollar, but also against Asian currencies, whose central banks intervene in foreign exchange markets to fix their currencies value against the dollar.

Meanwhile, central bankers everywhere ask themselves why keep ever larger international reserves in two of the world s most mismanaged currencies, the US dollar and the euro? However rare changes in reserve currencies have been historically, the current situation is no longer tenable but a switch could further destabilize the world economy.

Gains arising from the revaluation of non euro cash and bank amounts are treated as realized

From past experience with national currencies, Europeans could have expected that any of these shocks would trigger a severe crisis in foreign exchange markets. It is not difficult to imagine what would have happened during the recent financial market crisis if the euro area countries still had all their national currencies immense speculation against some currencies, heavy interventions by central banks, and finally a collapse of the parity system.

(a) The Registrar shall establish the operational rates of exchange between the euro and other currencies, on the basis of the operational rates of exchange established by the Secretariat of the United Nations.

(v) Gain loss on exchange arises from transactions conducted in currencies other than dollars (i.e. for the dollar based extrabudgetary technical cooperation activities in annex I, dollar statements) and the revaluation of assets and liabilities held in non dollar currencies.

The modern equivalent of the band widening of 1993 would be to maintain the euro for all members of the eurozone, but also allow some of them (in principle, all of them) to issue if necessary national currencies. The countries that did would probably find that their new currencies immediately traded at a heavy discount.

How can economic growth be revived and sustained throughout the EU? And how can Europe s institutions function with enhanced legitimacy to accommodate countries that share the euro and others that retain their national currencies?

As the dollar continued to weaken against the Euro and other major currencies, exchange rate fluctuations continued to affect core income positively, accounting for more than two thirds of the increase in regular income in 2004.

Exchange of currencies

PRINCETON The alternatives for Europe s currency, the euro, seem increasingly limited to a desperate muddling through or a chaotic collapse. But there is a bolder and more productive approach that relies on past experience with multiple currencies.

If the euro falls by 20 25 , bringing it close to parity with the dollar and weakening it to a similar extent against other currencies, the current account deficits in Italy, Spain, and France would shrink and their economies would strengthen. German exports would also benefit from a weaker euro, boosting overall economic demand in Germany.

depreciation of nonconvertible currencies.

(g) Translation of currencies.

Instead, Europe developed the euro, which solved the problem of speculative attacks and monetary credibility by replacing individual currencies with a new one. It was impossible to short the lira or the franc because there were no more lire or francs.

Tensions at the ECB and between the euro zone countries do not bode well for the stability of the common currency, both externally, vis à vis other currencies, and internally, in terms of inflation. The ECB will be scapegoated for that.

In fact, while the dollar depreciated during the last half of 2003, resulting in huge exchange gains in 2003, during the first five months of 2004, the dollar appreciated by 3 per cent against the euro and other major currencies.

Leaving the common currency would, of course, threaten collateral damage for the exiting country and raise the risk of contagion for other weak eurozone members. The balance sheet effects on euro debts caused by the depreciation of the new national currency would thus have to be handled through an orderly and negotiated conversion of euro liabilities into the new national currencies.

(ii) Non euro assets, liabilities, reserves and fund balances as at 31 December 2004 will be converted to a euro equivalent using the United Nations operational rate of exchange as at 31 December 2004 (reference GC.9 Dec.15).

Also this rise of local currencies.

But that's just part of the story. You have a similar trend with currencies currencies going through an extreme time of stability.

However, some claims were presented in other currencies, and some others were presented in United States dollars after conversion from other currencies.

FLORENCE Fears about sovereign debt and doubts about the euro rescue package have pushed the question of international reserve currencies to the fore. Until this spring, most observers had assumed that the share of the dollar in international reserves would gradually fall, while that of the euro would rise, and that the world would gradually and smoothly make a transition to a multi reserve regime.

Already, the interest rate differential between risk free bonds on both sides of the Atlantic say, US Treasuries and German Bunds has widened notably. And, at the same time, the dollar has strengthened not only against the euro, but also against most other currencies.

In principle, such a depreciation against all of the world s currencies is manageable. But if emerging markets force Europe to take all the adjustment, the results would be catastrophic, pushing up the euro to 1.50, 1.60 or beyond, with truly dire consequences for trade.

While oil exporting countries receive revenues in dollars (or their euro equivalent), they use different currencies to import goods and services from various countries. Any change in the exchange rate of the dollar affects the purchasing power of these countries, and therefore their real income.

From this perspective, the crisis countries would not be spared painful retrenchment as long as they remained in a monetary union that includes competitive countries. The only way to avoid it would be for them to exit the euro and devalue their new currencies.

Because their currencies are not widely used internationally, many of their bank liabilities are in euros. This renders them dependent on interest rate hikes to attract via the market and on swap lines from the ECB the euro liquidity that their banks desperately need.

The new rates are effective from the school year in progress on 1 January 2005. The currency areas where increases were approved are as follows Austria (euro), Belgium (euro), Denmark (krone), France (euro), Germany (euro), Ireland (euro), Italy (euro), Japan (yen), Netherlands (euro), Spain (euro), Sweden (krona), Switzerland (Swiss franc), United Kingdom (pound sterling), United States dollar in the United States and the United States dollar outside the United States.

That is why I believe that these countries and the eurozone more generally would benefit from euro depreciation. Although a weaker euro would not increase their competitiveness relative to Germany and other eurozone countries, it would improve their competitiveness relative to all non eurozone countries.

This damages European exports to both the US and Asia. Reduced European dependence on the US export market can hardly protect Europe from the effects of the US economic slowdown if the euro appreciates as much against the key Asian currencies as it has against the dollar.

Richard Nixon s treasury secretary, John Connally, once told a group of European leaders that while the dollar was America s currency, its misalignment was Europe s problem. Today, the misalignment of the dollar and the euro against the renminbi and other Asian currencies is increasingly becoming Asia s problem.

1.40 Although UNRWA's expenditure is incurred mainly in US dollars, 63 per cent of the income is received in non US dollar currencies, thus exposing the Agency to the risks of currency fluctuations.