Ever since the advent of the euro, observers have been on alert for signs that the new currency has been undermining London's predominance as a financial centre.

The worst-case scenario has been that the City of London would lose its status as the world's largest foreign exchange trading centre as business was repatriated to the eurozone.

With the euro now poised to assume a wider reality in the shape of notes and coins, this threat has been explored with renewed urgency.

So far, however, there is no real evidence that London is being hurt by the new currency.

The most authoritative guide to foreign exchange volumes by location - produced by The Bank for International Settlements in October - showed that London's share of transactions was virtually unchanged since 1998 at just over 30 per cent.

In fact, London's slice of currency trading was equal to that of its three nearest rivals, with the US taking 16 per cent, Japan 9 per cent and Singapore 6 per cent.

Frankfurt, London's main rival in Europe, came in fifth increasing its share slightly to 5.4 per cent of trading while the eurozone collectively took 13.5 per cent.

The BIS survey showed much the same picture in over-the-counter derivatives - market-traded interest rate swaps and options.

London continues to be the largest market for over-the-counter derivatives with 36 per cent of volume traded in the UK compared with 17.7 per cent in the US and 12.7 per cent in Germany.

Anecdotal evidence suggests that while currency volumes overall have been reduced by the introduction of the euro, London's position as the world's leading currency-trading centre has actually been consolidated by the euro. Since trading in the legacy currencies has died out, it has made more sense for banks to consolidate trading in a single centre.

"Far from nurturing a new centre in the eurozone, all the indications are so far that this centralisation process is taking place in London - and probably at the expense of the Continental centres," says David Lascelles, a director at the Centre for the Study of Financial Innovation. "Why keep traders in Paris and Frankfurt when they can access markets under one roof in London?"

The evidence for London's other wholesale markets is even more compelling and suggests that the lion's share of international business in euros has originated or been transacted in London.

London-based "book runners" organised an estimated 50 per cent of the issue of euro-denominated eurobonds in 1999, based on data supplied by Capital Data Bondward to the Bank of England.

The bulk of large cross-border mergers and acquisitions over the life of the euro have been masterminded by corporate finance departments in London.

The evidence to date was summarised by the Bank of England in its regular update on practical issues arising from the euro in November last year. "Since the launch of the euro all the available evidence continues to indicate that London has fully maintained its market share," the report says. "Most international market firms continue to believe that London's role as an international financial centre does not primarily depend on whether the UK is inside or outside EMU, though continued access on equal terms to the Single European Market is very important."

The Bank of England adds that the position of the City was supported by its critical mass of financial skills and support services: its large pool of available financial talent, efficient infrastructure and the ability of banks ready to fire as well as to hire. When coupled with a sympathetic regulatory framework, the Bank said, these attributes would continue to provide a powerful magnet for financial institutions.

This has been supported by a sharp rise in the number of banks from the European Union with a presence in the City. Between March 1998 and January 2001 this number increased by almost 50 per cent from 238 to 350.

Even those in the City who advocate British membership of the eurozone agree that London is likely to retain its place as the leading wholesale financial market in Europe even if the UK does not sign up to the euro.

The main case for joining is rather one of opportunity cost.

This has been most clearly articulated by Chris Huhne, a member of the European parliament and vice-chairman at Fitch Ratings. "Saying no to the euro could cost the City as much as $14bn a year in opportunity cost for equity trading alone," he says.

Being outside the eurozone could diminish London's ability to compete for fund management business as the European Union moves towards a single market in financial services.

"It is rare for the centre of management of pension funds or other pooled investments to be outside the currency bloc of the investors," says Avinash Persaud, head of global research at State Street, the Boston-based investment bank. "Even though the City is not currently missing opportunities it may [do] so in 10 years time."

But even this threat to the City is seen by many to be based on a degree of speculation.

Michael Perry, the director general of the Fund Managers Association, argues that there is no material threat to fund management from staying out of the eurozone. "There is no sign that the single market in financial services will be limited to eurozone members, since this would be contrary to the whole idea of the European Union," he says. "London would have just as much right as any other EU centre to sell and market its financial services across Europe."

The euro so far has failed to undermine London's status as a financial centre. Many are now arguing that there is no reason it should do so in the future.