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European bankers ready to trade in euros

Britain is sticking with its pounds and pence for now, but London's bankers and traders spent the weekend preparing to plunge into the uncharted waters of the single European currency today.

Like Sweden and Denmark, Britain has postponed participation in the single currency and economic and monetary union, which locks 11 of the 15 European Union nations together financially. Greece didn't meet the economic criteria for entry.

London is the world's leading financial center. Five hundred international banks are based in the City, London's financial district. Sixty percent of share transactions in London are in non-British stocks and a third of the world's foreign exchange deals are made here.

Any British investment bank that wants to buy and sell shares in European companies will have to be able to do it in euros this morning. Exchange rates for the 11 currencies were not fixed until Thursday, so London institutions spent the first days of 1999 redenominating bonds and converting currency balances to euros.

Many businesses _ particularly importers and exporters _ will need to set prices in euros.

The first euro trading began in Sydney, Australia, at 5 a.m. today, with the currency trading between $1.1742 and $1.1777.

At the Westpac Bank foreign exchange trading room in Sydney, there was a hum of activity from traders and media taking pictures and television footage of the opening of trade in the currency.

Trading was light. "People are just having a small punt so they can say they dealt in the euro," said Wayne Raven, a senior manager of Westpac's corporate, currency and commodity division.

Speculation ran high in Asian newspapers Sunday about what the new currency would do to the region's troubled economies.

"With the financial crisis in Asia and Russia causing anxieties about the dollar-dominated currency system, the eyes of the world are on the euro, which has a chance of rivaling the U.S. dollar," Japan's Mainichi newspaper said in a front-page article. For those who might have missed the point, the headline read: "Topple the Dollar's Dominance!"

The new currency is worth 1.95583 German marks, 6.55957 French francs, 1936.27 Italian lire and 166.386 Spanish pesetas. The euro was expected to start trading at about 133 Japanese yen and 70 British pence.

Marks and Spencer, a major British clothing chain with stores in 10 of the 11 countries, will accept euro-denominated checks and travelers checks at its stores there and in Britain.

Tourists contribute about 40 percent of the business in its main London store, so "as a business, we're taking such practical steps as are necessary," said spokeswoman Frances Cutts.

The City hummed with the efforts of thousands of financial workers getting their companies and computers ready. By midday Sunday, confident statements began to emerge from the financial labyrinth.

"We're very pleased," said Keith Hamilton of Dresdner Kleinwort Benson investment bank. "It's been a long, long weekend; lots of bleary-eyed people around, but we'll be ready."

Peter Letley, managing director of business operations for HSBC Investment Bank, said the company was "completely on course" and that conversion was complete in the bank's office in Tokyo, where trade in the euro began hours before London.

"We had to do 90 percent of the work in conversion that we would have had to do if we (Britain) were a member" of the single currency, Letley said.

Prime Minister Tony Blair's government has said it will wait to see whether joining the single currency is in Britain's economic interest, and then put the question to the people in a referendum.

But the euro will bring one big change soon to thousands who toil in the London markets _ the loss of some traditional "bank holidays," when markets and businesses shut down for long weekends in spring and summer.

"We will need to work on the days which are public holidays here but which are not public holidays in Europe," Letley said. "There are only about three days that are holidays right across Europe."

On the plus side, the euro should simplify accounting. "It will be much less complicated if the settlement of all your accounts for 11 countries is in one currency," Letley said. "Eventually it's going to simplify things enormously."

The euro and national currencies will operate in parallel until 2002, when single currency notes and coins will go into circulation and supplant the familiar German marks, French francs and Italian lire.

Letley said he felt optimistic "because the euro market in general is easier to trade in and will be better for the City in the long run. I don't think (Britain's) not being in is going to have a negative effect."

The 15-nation EU represents 20 percent of the world's economic output and 18 percent of world trade.

"A successful EMU (economic and monetary union) means growth and jobs for all Europe, including the U.K. We wish it well," said Stephen Wall, Britain's ambassador to the EU.