Please note: The above table does not include the Luxembourg Franc, even
though it is one of the "In" currencies, because the LUF
is identical to the BEF.
The market today is not exactly at the above rates, but is very, very
close. In any case, the Central Banks of the "In" countries
stand committed to bring the market to the above rates by / on 1st Jan 1999. The market itself is unlikely to protest or try and thwart the
central banks. So, what is the significance of 1st Jan, 1999? Today
we do not know the answer to the question, "How many Dollars
to a Euro?". This question will be answered on 1st Jan 1999.
The clue to the answer is the agreement that on 1/1/199, 1 ECU =
1 Euro. That is to say, the Euro-USD rate on 1/1/99 will be the
ECU-USD rate that will prevail on that date. The question to ask,
therefore, is "What will be the ECU-USD rate on 1/1/99?"
We also do not know today the answer to the question, "How
many Marks to the Euro?" Please note that we know how many
Marks are supposed to buy 1 ECU today, namely, DEM 1.97738 = ECU 1.
This is ECU-DEM Central Parity rate. But, we do not know how many
Marks to the Euro. This question is also going to be answered on 1/1/99.
The ECU is a Basket currency. This basket is not the same as the
Euro basket. Right now the Euro is in a cocoon, with the ECU as
the egg. On 1/1/99, the ECU will metamorphose into the Euro. After
that, the ECU will cease to exist. Whether what will emerge will be
a moth or a butterfly is a different question.
Today there are 3 currencies in the ECU basket which are not going
to be in the Euro. These are the Sterling Pound, the Danish Kroner
and the Greek Drachma. On the other hand, there are 2 currencies
in the Euro, which are not part of the ECU basket. These two are
the Finnish Markka and the Austrian Schilling. So, for the ECU to
change into the Euro, 3 currencies have to go out and 2 currencies have to come into the basket. And this is what makes the question,
"What will be the ECU-USD rate on 1/1/99?" all the more interesting.
That may automatically answer the question, "How many Marks to
a Euro?" Or, it may not. That is to say, the present ECU-DEM
Central Parity itself may change. This is a question
we need to answer.
There are issues relating to the Euro that are not as yet fully clear. This is just an attempt to record aspects of what we know so
far, as also to say what is as yet unknown. No predictions are being made, nor trade
recommendations being given. Neither the firm or the authors bear any responsibility for
any losses that might accrue to anyone due to any actions taken/ not taken based on this
report or otherwise.