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Currency competition between the dollar and euro: Evidence from exchange rate behaviors

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  • Eun, Cheol S.
  • Kim, Soo-Hyun
  • Lee, Kyuseok

Abstract

Using a simple numeraire currency-independent metric to measure distances between currencies, it is found that for most of the 25 sampled floating currencies, excluding the US dollar and euro, there has been a noticeable decrease in the ratio of a currency’s distance from the euro to its distance from the dollar during the period from 1999 to 2013. Evidence that exchange risk has increased substantially is also found for dollar-based agents, while it has decreased for euro-based agents. Overall, the findings indicate that the influence of the euro, relative to the dollar, on other currencies has increased since its introduction.

Suggested Citation

  • Eun, Cheol S. & Kim, Soo-Hyun & Lee, Kyuseok, 2015. "Currency competition between the dollar and euro: Evidence from exchange rate behaviors," Finance Research Letters, Elsevier, vol. 12(C), pages 100-108.
    • Handle: RePEc:eee:finlet:v:12:y:2015:i:c:p:100-108
    DOI: 10.1016/j.frl.2014.11.003
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    3. Shahzad, Syed Jawad Hussain & Arreola-Hernandez, Jose & Bekiros, Stelios & Rehman, Mobeen Ur, 2018. "Risk transmitters and receivers in global currency markets," Finance Research Letters, Elsevier, vol. 25(C), pages 1-9.
    4. Chang, Ya-Ting & Gau, Yin-Feng & Hsu, Chih-Chiang, 2022. "Liquidity spillover in foreign exchange markets," Finance Research Letters, Elsevier, vol. 44(C).

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    More about this item

    Keywords

    Currency competition; Dollar; Euro; Exchange rates; Exchange risk;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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