CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

How will Latvia joining eurozone affect the single currency

Article By: ,  Financial Analyst

Latvia will get its seventh different currency in a century as it signs up to use the euro as part of its deal to join the eurozone next year.

The country will become the latest member of the group on January 1st and the nation's businesses will be hoping this provides a boost to their profits.

One such company owner is Valmiermuiza brewery boss Aigars Rungis, who will save on currency exchanges with his trades with German companies once Latvia has adopted the euro.

Speaking to BBC News, he explained that joining the eurozone will allow firms in Latvia to “feel more safe economically, less that we can be influenced by outside”. Mr Rungis cited the influence of Russia as a particular concern for Latvian entrepreneurs.

Euro's future

Latvia's arrival in the eurozone from tomorrow could also have an impact on the state of the euro itself, which has been particularly resilient over the course of 2013, despite the ongoing financial issues with a number of countries already using the single currency.

Senior foreign exchange strategist at Rabobank Jane Foley recently singled out the euro as the strong currency of the year, but she expressed doubts over whether the single currency could keep up its momentum over the course of the next 12 months.

Holger Schmieding, the chief economist at Berenberg Bank, added that the euro has been boosted by the fact there is now a lender of last resort, as not having one previously caused issues.

"Ever since the European Central Bank has established itself as a lender of last resort, everything has gone right. Spain is growing, Germany is growing, Ireland and Portugal are growing," he said.

But in Latvia, companies are hoping the country's adoption of the euro is good for business. A recent study found that firms believe borrowing costs will go down and foreign investment will go up.

Prime minister Valdis Dombrovskis, explaining why Latvia wanted to sign up for the single currency, previously said: "This crisis is not a currency crisis. If you look at the euro as a currency it's doing just fine.”

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