International role of the euro
Definition and policy line
The international role of the euro refers to the use of the euro in global markets and by residents of countries outside the euro area. Non-euro area residents may use the euro, for instance, in payment transactions or financial market transactions with euro area residents or with other non-residents. In particular, the euro is used by the official sector of several non-euro area countries as a reserve currency or as an anchor currency.
The ECB has a neutral policy stance regarding the international use of the euro, it neither hinders nor fosters the use of its currency outside the euro area, which it regards as predominantly the outcome of market forces.
The following table provides a snapshot of the key statistics regarding the international role of the euro. It is taken from the latest publication of the annual review of The International Role of the Euro (see below).
For instance, it shows that in global foreign exchange reserve holdings, the share of euro-denominated instruments - around 26 percent - remained virtually unchanged compared to the previous year. In international debt markets, the share of euro-denominated debt securities in total outstanding securities declined by around 2 percentage points to 27.4 percent at end of 2010, compared to the previous year. In the cross-border loan market and the cross-border deposit market, the share of euro-denominated instruments increased by around 0.5 percentage point and 1 percentage point, respectively, at the end of 2010, compared to the previous year. Finally, in foreign exchange markets (daily average turnover), the share of the euro was equal to 19.5 percent in 2010, compared to 18.5 percent in 2007. It is important to remind that changes in the relative importance of the euro in international markets are very gradual.
|Key data on the international role of the euro|
|Sources: BIS, ECB and national sources.
( 1 ) At constant end-2010 exchange rates.
|Share of the euro in:
(unless otherwise indicated)
|- stock of global foreign exchange reserves ( 1 )||26.3%||26.0%|
|- stock of international debt securities (narrow definition)( 1 )||27.4%||29.5%|
|- stock of cross-border loans ( 1 )||19.1%||18.6%|
|- stock of cross-border deposits ( 1 )||21.6%||20.4%|
|- daily foreign exchange market turnover||19.5%||18.5%
(as at 2007)
|- settlement/invoicing of goods exports from selected euro area countries to non-euro area countries||68.0%||67.4%|
|- settlement/invoicing of goods imports of selected euro area countries from non-euro area countries||53.5%||48.6%|
|Cumulative net shipments of euro banknotes to destinations outside the euro area||EUR 107 billion||EUR 109 billion|
Related ECB publications and press releases
The ECB closely monitors the international use of the euro and, in particular, produces a regular review – "The International Role of the Euro" – which examines recent developments in the use of the euro by non-euro area residents in international trade and international financial transactions. It provides the public with a broad set of timely indicators and statistics, drawing partly on original data compiled by the ECB and the national central banks of the Eurosystem as well as on time series provided by other central banks participating in surveys carried out by the ECB.
The annual review on the international role of the euro of the ECB does not only present recent developments and trends; it also provides an in-depth analysis of selected issues, studying the possible determinants and implications of the international use of currencies. In the recent years, the following topics have been studied in the review:
- The impact of asset-backed securities on the currency composition of the stock of international debt, July 2011
- What makes a currency a safe haven, July 2011
- Prospects for the international use of emerging market currencies, July 2011
- Excess returns on net foreign assets and international currencies, July 2010
- Currency choice in the issuance of foreign currency-denominated bonds, July 2009
- The use of the euro in global foreign exchange reserves, July 2008
- Asset substitution in central, eastern, and south-eastern Europe: trends and determinants, June 2007
- Determinants of the currency of invoicing in international trade, December 2005
- Determinants of the currency choice in international bond issuance by corporations, January 2005
- The City of London and the international role of the euro, December 2003
This analytical work fostered a stream of research in the ECB working paper or occasional paper series:
Articles in the Monthly Bulletin
- “International role of the euro”, 10th Anniversary of the ECB, May 2008, pp. 96-99
- “The international role of the euro”, Monthly Bulletin, August 1999, pp. 31-53
Working Paper Series
- Exchange rate anchoring - Is there still a de facto US dollar standard? by T. Bracke and I. Bunda, 1353, June 2011
- Getting beyond carry trade: what makes a safe haven currency? by M. Habib and L. Stracca, 1288, January 2011
- Should larger reserve holdings be more diversified? by R. Beck and S. Weber, 1193, May 2010
- Excess returns on net foreign assets: the exorbitant privilege from a global perspective, by M. Habib, 1158, February 2010
- Global roles of currencies by C. Thimann, 1031, March 2009
- Foreign-currency bonds: currency choice and the role of uncovered and covered interest parity by M. Habib and M. Joy, 947, October 2008
- Optimal reserve composition in the presence of sudden stops: the euro and the dollar as safe haven currencies by R. Beck and E. Rahbari, 916, July 2008
- Choice of currency in bond issuance and the international role of currencies by N. Siegfried, E. Simeonova and C. Vespro, 814, September 2007
- Financial dollarization: the role of banks and interest rates by H.S. Basso, O. Calvo-Gonzalez and M. Jurgilas, 748, May 2007
- Optimal currency shares in international reserves: the impact of the euro and the prospects for the dollar by E. Papaioannou, R. Portes and G. Siourounis, 694, November 2006
- The euro and international capital markets by C. Detken and P. Hartmann, 19, April 2000, also published in: International Finance, April 2000, 3 (1), Vol 1, pp 53-94.
Occasional Paper Series
- The impact of sovereign wealth funds on global financial markets by R. Beck and M. Fidora, 91, July 2008
- Oil market structure, network effects and the choice of currency for oil invoicing by E. Mileva and N. Siegfried, 77, December 2007
- The international role of the euro: evidence from bonds issued by non-euro area residents by A. Geis, A. Mehl and S. Wredenborg, 18, July 2004
- Official dollarisation/euroisation: motives, features and policy implications of current cases by A. Winkler, F. Mazzaferro, C. Nerlich and C. Thimann, 11, February 2004.