Jonathan Charles: a very smooth launch

In European capitals, foreign exchange, share and bond market traders described the transition to the new single currency as smooth with trading proceeding without major incident.

The European Central Bank (ECB) said its mechanism for providing large cross-border euro payments within the European Union began operating "successfully" at 0600 GMT.

Angus Crawford observes the smooth transition to euro trading at Deutsche Bank

The settlement system, known as TARGET, combines the former settlement systems of the 15 EU countries. "The system is available for banks and their customers and already hundreds of cross border payments have been processed," the ECB said in a statement.

'All systems go'

In London, the world's currency-trading capital, John Townend, director for Europe at the Bank of England, said: "It has been a very steady, very calm opening and the markets are functioning well. It's all systems go."

A survey of 24 prominent banks and institutions in the City involved in currency and bond trading by Reuters news agency showed a few dealing staff reporting a handful of small technical teething problems but no significant troubles.

Traders proceed with caution

In Dublin, a spokesman for Allied Irish Banks said traders were trying not to overstretch their systems. "But we are very confident that they will stand up, and we have had no difficulties so far," he said.

However, the president of the Belgian stock exchange, Olivier Lefevre, said it was too early to say whether there will be any technical problems arising from the first day of euro trading in Brussels.

"It is too early to claim a victory. So far we see normal trading with no technical problems and the liquidation of deals going well. But we will have to wait until the settlement of the accounts to be sure," Mr Lefevre said.

Despite a solid performance by the euro itself on currency markets, traders said technical factors associated with the changeover were top of mind rather than economic fundamentals which normally govern trading decisions.

Volumes low

Traders in most markets said volume was small in morning sessions, with many dealers rather hesitant as they tried out their trading systems.

"It's a steady rather than a spectacular start for the euro," said Neal Kimberley, manager on the foreign exchange desk at Bank of Tokyo-Mitsubishi in London.

The euro is trading well above the starting level laid down by the European Commission last Thursday while Continental share and bond markets are showing strong rises, although the overall gains have been exaggerated by the low trading volumes.

Fingers crossed

Despite years of planning and the frenzied activity over the New Year weekend to get systems ready, nobody was prepared to predict that trading on Monday would pass without a hitch.

But the worst-case scenario of large numbers of trades failing causing chaos across the world's financial markets has not eventuated.

Chain reaction

Up until Monday banks had only tested their own systems in isolation. But to operate successfully they rely on fellow members of the financial community. If one link in the chain is broken, deals could fail to be completed and both brokers and their customers could lose millions.

Cap Gemini, one of Europe's leading computer consultancies, had warned that up to 40% of all euro transactions this week could be delayed due to computer problems at financial institutions.