Question

The Euro was launched as a brand new currency in 2000 and the countries with their 11 currencies which got replaced with the Euro became the Eurozone.

i)What was the effect on daily trading volume in foreign currency markets?

Answer 1

The introduction of the Euro as a common currency in the Eurozone led to an increase in daily trading volume in foreign currency markets.

Step-by-step explanation:

The introduction of the Euro as a common currency in the Eurozone had a significant effect on daily trading volume in foreign currency markets. Before the Euro, countries within the Eurozone used different currencies, which meant that trading between these countries required currency exchange. This resulted in higher transaction costs and increased complexity in trading.

However, with the adoption of the Euro, the need for currency exchange within the Eurozone was eliminated. This led to a reduction in transaction costs and simplified trading, as there was no longer a need to convert currencies. As a result, daily trading volume in foreign currency markets increased as trading became easier and more efficient within the Eurozone.