1 Franc – Grand Duchy of Luxembourg

In 1986, the Grand Duchy of Luxembourg was a full and integral participant in the European Monetary System (EMS), which it had helped establish in 1979. The country's currency was the Luxembourg franc (LUF), which was legally distinct but maintained a fixed and irrevocable 1:1 parity with the Belgian franc (BEF). This monetary union, the Belgium-Luxembourg Economic Union (BLEU), had been in place since 1922 and meant that both currencies circulated freely within Luxembourg, though the Luxembourg franc was primarily used for domestic cash transactions while the Belgian franc dominated larger commercial and financial operations.

The year fell within a period of relative stability for the EMS, following the turbulence of its early years. Luxembourg, with its small, open, and financially robust economy, did not face the same devaluation pressures as some larger EMS members. Its monetary policy was effectively set by the Belgian National Bank, in close coordination with Luxembourg's own monetary institute, the Institut Monétaire Luxembourgeois (IML), founded in 1983. The primary focus was on maintaining the franc's strong peg within the EMS's Exchange Rate Mechanism (ERM), ensuring price stability and supporting Luxembourg's growing role as an international financial centre.

Therefore, the 1986 currency situation was characterized by profound stability and integration. There was no domestic debate about sovereign currency; the fixed parity was a cornerstone of economic policy. Luxembourg's financial authorities were less concerned with exchange rate volatility and more focused on prudential banking supervision and fostering the burgeoning investment fund sector. This stable monetary environment, anchored by the EMS and the BLEU, provided the foundation for the country's continued economic prosperity and its unwavering commitment to the broader project of European monetary integration, which would later lead to the Euro.