What will be the effect on dollar's value if Iran wants to do its oil reserves in Euro?

Answer 1

Absolutely nothing. International exchange markets are more concerned with interest rates and budget deficits than what some country happens to price their goods in.

Iran can price oil in Euros, Dollars, seashells, or magic carpets and it would make no difference.

Economists have calculated that the "reserve currency" status of the dollar has an effect of about 0.3% of GDP, due to what is essentially an interest-free loan.

Answer 2

What do you mean, "to do its oil reserves"? Do you mean "to charge for oil shipment in euros"? If that's your question, the answer is, nothing. Since the dollar price would continue to exist (and it would, because both primary oil markets, the New York Mercantile Exchange and the International Petroleum Exchange would continue to exist), the euro-denominated price will have to be exactly the same as dollar-denominated price. If it is not, there will be opportunities for triangular arbitrage involving oil, euro, and dollar, so prices will be forced back into equilibrium...

Also, you might want to read this essay to get your thinking on the issue started in the right direction:

http://www.pkarchive.org/trade/seignor.html

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Answer 3

NC is right -- no effect. Ask yourself: what does Iran do today with the US dollars it receives from selling oil? They buy things from people who want payment in US dollars, or else Iran converts the dollars to some other currency to make purchases from people who want another currency.

How would changing their revenue currency into Euros change anything? They'd have to convert their Euros to dollars to make those same US dollar purchases they were making before; the only change is they'd no longer be selling dollars into the currency markets to get other currencies. In fact, they'd be selling Euros. Result is no change in demand for dollars.

Answer 4

good question. Not just Iran. China and wants to cash in US dollars. It will mean inflation/ and a nasty recession. All of a sudden our us dollar wont go so far overseas. Consider I bonds (partially tied to inflation); forteign certificates of deposit that earn interest but in foreign currencies; and precisou metals such as gold, silver, platinum and palladium.

Answer 5

Lets watch and see!