In the early 2000s the euro grew in appeal for many reasons: euro-zone was similar to the U.S. economy in relations to trade openness and GDP, the region was able to keep inflation under control and never experienced external debt or current account deficit like the United States. This favored the euro against the dollar. (Nesvisky, 2005). Many experts thought the euro was inevitably the rival to the dollar and would eventually take over the the reserve currency. The thought was not if, but when this would happen.
By 2005 many central banks were beginning to diversify away from the dollar and began to hold more Euros; by the end of 2006 the total number of Euros in circulation exceeded dollars by 75 billion, further evidence of its gaining strength (EconEdge, 2007). In addition, a study by several economists revealed that the reserve currency is basically the one that more countries peg their own currency to and could easily transition to the euro on the condition that most countries would soon begin to manage their currencies with respect to the euro instead of the dollar. These results were based on examining the currencie...
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Stewart, Heather. (2012). Euro Crisis spreads and puts the world economy at risk. The Observer.
Washington, R.A. (2013, April). What Success looks like. The Economist. Retrieved from http://www.economist.com/blogs/freeexchange/2013/04/euro-crisis-3
Could the Euro Replace the Dollar as the World's Reserve Currency. (2007). The Economic Edge.
Retrieved from http://econedge.org/23/could-the-euro-replace-the-dollar-as-the-worlds-reserve-currency/
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