The world's financial markets are about to start trading in the euro, Europe's new single currency.

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The first major euro trades are expected to take place in Australia. Foreign currency dealers will start trading at around 0500 GMT on Monday morning, while it is still early Sunday evening in Europe (1800 GMT).

However trading is likely to be subdued while dealers get to grips with the new currency.

The euro's first big test will come several hours later with the opening of Asia's truly big financial markets in Tokyo, Hong Kong and Singapore.

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By the time Europe wakes up on Monday morning the euro will have finished its first day of trading in Asia. But all eyes will be on dealers in Europe's main financial centres such as London, Frankfurt and Paris. They are likely to be the main drivers of the value of the euro in its early days.

Day of reckoning

German bank staff wait for the introduction of the euro

Triumphantly launched on 1 January the euro was immediately heralded as one of the most important economic events of the 20th century.

Now it is up to hard-nosed bankers and City traders around the globe to determine the fate of the world's most modern currency.

Financial institutions have had employees working around the clock over the New Year weekend to get ready for the euro. But nobody knows for sure whether everybody will be ready. There are still fears that the introduction of the euro could create chaos across the world's financial system.

Looking at London

London holds the key to euro currency trading

The reaction of currency dealers in London will be particularly important. Although the UK has decided not to join the 11 countries that have initially signed up to the euro, around 1 in every 3 of the world's foreign exchange deals are made in London.

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It will be also be a testing time for major continental European stock markets such as Germany and France, where stocks will now be quoted in euros.

Strong currency

It is unlikely that there will be a rush for euros, because most banks and governments already hold them, because their old Deutschmarks, French francs and other Euroland currencies have now become euros.

Therefore many analysts believe the euro will prove to be a strong currency and could even end the US dollars long standing dominance in the world's financial markets. The banking community is likely to purchase large quantities of euros in preference to currencies outside Euroland such as the pound sterling or even the dollar.

Indeed an Indian public-sector bank has already purchased 5m euros and several leading financial institutions in the City of London are believed to have been active in the euro market.

Slow start

But despite the hype surrounding the launch of the euro, trading is likely to get off to a slow start.

Many dealers will treat the new currency cautiously. They have to get used to new share prices and different currency spreads. Furthermore it will take time to assess whether trading systems are able to cope with the euro.