The use of the Euro as an international currency and its determinats

Abstract

This dissertation examines the overall usage of the Euro as an international currency since its inception, focusing on factors that influence such usage and its ability to challenge the dominance of the U.S. dollar. This research aims to explore the Euro's international usage across time based on the functions of money and to identify the key determinates that impact its international usage. Two main research questions aimed to achieve such analysis: 1) How is the Euro utilised as an international currency?, and 2) What factors influence the use of the Euro as an international currency? This research undertook a mixed-method approach using both qualitative and quantitative analysis. This study found that although the Euro established itself as an international currency, its usage is still second to that of the U.S dollar. With some functions such as Swift Trade Finance, the U.S dollar has a total monopoly. Furthermore, this study identifies several factors hindering the Euro's process to continue challenging the U.S dollar's hegemony such as the lack of fiscal union and liquidity issues. This research suggest that whilst the Euro has established itself as an international currency, it remains secondary to the dollar.