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Legacy Currencies Eclipsed By Success of Euro Debut
LONDON — National currencies replaced by the euro, the so-called legacy currencies, continued to change hands on Monday but trade was minimal as dealers concentrated their energies on the euro.

"There's very little going on (in legacy currencies) and there's a surprising lack of rates in dollar/mark," said one U.S. bank dealer. "It looks like people are still finding their feet and will being doing so over the next few days."

The euro's smooth start also dampened enthusiasm for legacy currencies, which went down without even a fight to maintain their share of the market.

"If there had been liquidity problems or other problems with the euro then we might have seen more trade in the legacy currencies," said Steve Barrow, currency strategist at Bear Stearns in London.

European politicians have tried to smooth the transition to the euro by allowing legacy currencies such as the mark to continue to exist alongside the euro until July 1, 2002 at the latest.

Much of the legacy demand for currencies will be from people choosing to settle forward contracts due after December 31 in legacy terms and then convert the proceeds into euros, say dealers.

A lot of legacy business will also be down to customers still uncomfortable or unable to trade and settle in the new currency.

Yet on Monday, the first full business day of trading in euros, there was little evidence of legacy currency demand.

"We have been surprised by the low level of demand for legacy currencies," said one UK bank corporate dealer. "It may be that prices have been quoted so wide that it's stopping a lot of people getting involved."

Though interbank trade in the legacy currencies has officially disappeared, banks will still quote in legacy terms for customers.

"If a customer asks us for a dollar/mark quote, we can provide that, but in interbank trading it does not exist any longer," said Neil Kimberley, manager on the foreign exchange desk at Bank of Tokyo-Mitsubishi in London.

Some see legacy business picking up when the novelty of trading in euros begins to wane and people become more confident in exploiting the opportunities, if any, that may arise between the euro and the legacy currencies.

"I would liken the euro at the moment to the Christmas toy that everyone wants to own," said the U.S. bank dealer. "We'll have to wait and see whether or when they get bored with it."

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