It also stands in sharp contrast to the speculation, in the years leading up to the euro’s debut, that there might be a massive and rapid reallocation of investor portfolios out of dollars and into Europe’s new currency. Some experts estimated that such a reallocation of official and private portfolios could total in the range of $ billion to $ trillion.
Such a massive reallocation would, of course, have resulted in an appreciating euro and depreciating dollar in the early stages of monetary union. We now know that, at least in this initial period, rapid portfolio reallocation does not seem to have occurred and the euro’s exchange value relative to the dollar has moved exactly contrary to what some had predicted.