Number: RL34083
Title: The Dollar's Future as the World's Reserve Currency: The Challenge of the Euro
Authors: Craig K. Elwell, Government and Finance Division 
Abstract: The euro is seen by some as poised to challenge the dollar in the store of value function of a reserve currency. The sheer magnitude of dollar assets in the official reserves of foreign central banks and the realistic prospect of continued, and perhaps disorderly, depreciation of the dollar against most currencies, place central banks at considerable risk of incurring large capital losses on their dollar asset holding. With more than enough dollar reserves to meet liquidity needs, prudent asset management would seem to dictate some diversification away from the dollar and toward the euro.
Pages: 8
Date: July 10, 2007