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While the beleaguered euro has been a real letdown, there can be no denying that its January 1999 launch has had a significant impact on the world’s currency markets.

Since the end of World War II, major world currencies often moved in tandem against the dollar. This is no longer the case.

When the yen comes under selling pressure against the dollar, it often gives up ground against the euro.

Conversely, however, the yen’s rise against the dollar often puts the euro under selling pressure against the dollar.

What this means is that the euro’s launch has undermined the dollar’s relative position as the world’s reserve currency. In looking for clues to future developments on the world currency markets, we cannot take our eyes off the changing trilateral relations of the United States, Europe and Asia, including Japan.

The yen’s future strength will be affected by its relative strength against both the dollar and the euro.

A U.S. economic slowdown is a major downside factor for the yen because it puts a dent in consumer spending in Japan’s traditional export markets.

The euro, on the other hand, comes through largely unscathed.

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