By Daniela Cambone of Kitco News www.kitco.com
Montreal (Kitco News) -- News that Iran's central bank may have begun switching €45 billion ($55.06 billion) of its foreign-currency reserves into dollars and Gold further increases doubt over the state of the euro, say analysts.

“It has become very evident that the euro is not a suitable asset for long-term reserves. The currency is only 10 years old and unlikely to last another 10,” said Adrian Day, principal of Adrian Day Asset Management in an interview with Kitco News.

According to news reports from Iran’s state-run news agency, Press TV, the country’s central bank is selling 15 billion euros in the first of three stages, which will be completed by Sept. 22.

Iran’s decision to switch out of the euro would be a strong departure from Iranian President Mahmoud Ahmadinejad's order last September that the central bank shift more of the Iran’s currency reserves out of dollars and into euros. During this time, the U.S. was adding sanctions to stop Iranian nuclear development.

“Iran would not be the only country to get nervous about the euro. The latest report (for April), for example, shows that China was a net buyer of dollars for the first time since October,” said Day.

Press TV reported earlier today, "Central bank foreign currency experts believe that this economic crisis in Europe is getting worse and will Lead to a further fall in the value of the euro and will increase the value of the dollar."

Gold, as the purest form of money and the only financial asset that is no-one else's liability, is the clear choice right now, said Day.

“If the euro may not be around for another decade and is certainly unstable; if the yen is expensive and the economy there weak; and if the fundamental concerns about the dollar remain, where else to put long-term reserves? The British pound?,” Day questioned.

George Gero, vice-president of global futures at RBC Capital Markets, says this is all part of a selling-of-euro phase.

“The last momentous sale from the IMF in April (14 tons) also was to buyers who don’t want euros or other currencies. The havens are Gold and the dollar- both freely convertible to each other,” said Gero.

The euro has fallen 15 percent against the dollar this year, reaching a four-year low yesterday, amid concern the debt crisis that started in Greece will spread to other EU nations including Portugal and Spain.

--By Daniela Cambone of Kitco News, dcambone@kitco.com

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