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