In the world of FX trading, the Euro is an extremely important currency. Only the United States Dollar (USD) is traded more than the Euro (EUR). Together, these two currencies form the most traded currency pair of them all. If we look at data from the 2013 Triennial Central Bank Survey, we see that this pair made up nearly one fourth of the total FX trade for that year. All in all, the Euro was included in one third of all trading.
The Euro is also the second-most popular currency for national currency reserves, with the USD being the most popular one.
Basic information about the Euro
- The ISO 4217 code for the Euro is EUR (numerical: 978).
- The symbol for the Euro is €.
- The central bank for the Euro is the European Central Bank (ECB) in Frankfurt.
- 1 Euro is equal to 100 cents.
- The Euro is sold freely on the FX market.
- The Euro has never had a gold standard or silver standard. It was launched as a fiat currency.
The creation of the Euro
The Euro is a very young currency. Going by the name European Currency Unit (ECU), it was officially launched on 1 January, 1999, but only as an electronic unit of account. It would take exactly three years before the premier of Euro bills and Euro coins.
The central bank for the Euro is the European Central Bank (ECB) in Frankfurt. So far, ECB has focused on maintaining low interest rates.
The Euro is the official currency for the Eurozone. At the time of writing, 19 of the 28 European Union members are also part of the Eurozone.
The Eurozone member countries (2016)
According to EU membership rules, a EU member must become a member of the Eurozone as soon as the member meets certain criteria. Two members are exempt from this obligation: Denmark and the United Kingdom. Sweden has no such exception, but is willfully avoiding to meet the criteria. The other six member states are expected to join the Eurozone as soon as they meet the criteria.
The minting of Euro coins and the printing of Euro bills falls under the auspices of the Eurosystem, which is comprised of the central banks of the Eurozone countries.
San Marino, Monaco, Vatican City and Andorra is not a part of the European Union but have an agreement with the EU that allow them to mint a limited amount of Euro coins (see below).
As mentioned above, the first physical Euro money entered circulation on 1 January 2002. By August 2014, the total value of Euro bills and Euro coins in circulation was roughly €995 billion.
Outside the Eurozone
A handful of nations and territories have adopted the Euro as their official currency without being a part of the Eurozone.
Within Europe, the sovereign micro-states San Marino, Monaco, Vatican City and Andorra all have monetary agreements with the EU that sanction their use of the Euro as their official currency. They are allowed to mint a limited amount of Euro coins (but no Euro banknotes) with their own respective national symbol on the obverse side and these coins are valid throughout the Eurozone.
The Sovereign Base Areas of Akrotiri and Dhekelia, an overseas territory of the United Kingdom located on the island of Cyprus, has adopted the Euro as their official currency even though the Euro is not the official currency of the United Kingdom.
The sovereign nations Kosovo and Montenegro have unilaterally adopted the Euro as their official currency. They have no agreement with the EU that allows them to print Euro coins or Euro banknotes.
Outside Europe, Saint-Pierre-et-Miquelon (off the Canadian coast), Saint Barthélemy (in the Caribbean Sea), and The Territory of the French Southern and Antarctic Lands, all have agreements with EU to use the Euro as their official currency. Since they are non-sovereign entities, they are not allowed to mint Euro coins or print Euro bills.
In April 2009, the Zimbabwean dollar was suspended by the Zimbabwean government due to hyperinflation. Since then, Zimbabwe officially uses several other currencies, of which the Euro is one.
Cuba and North Korea both have their own (non-convertible) national currencies for use within the country, but have the Euro as their official currency for international trading.
According to the European Commission, the two parallel lines on the €-symbol symbolizes the stability of the currency. The overall symbol was inspired by Epsilon, the 5th letter of the Greek alphabet.