This paper provides the first empirical examination of the major currencies' roles in international capital markets after the introduction of the euro. Time series of new measures for both international financing currency use and international investment currency use are presented. The data compare euro uses in 1999 with the aggregate of predecessor currency uses between 1994 and 1998 and with dollar and yen uses. A number of key factors for international portfolio investments are examined, including relative market liquidity and assets' relative risk characteristics. The euro immediately became the second most widely used currency in international capital markets. The paper also discusses links between the strong external supply of euro-denominated bonds, the most pronounced change during the first year of the euro, and exchange rate developments. Most of the increased issuance of euro-denominated bonds by non-residents of the euro area seems to have been bought by euro area residents. Copyright 2000 by Blackwell Publishers Ltd.
