COPENHAGEN Sept 24 - Malaysia may slightly raise the amount of euro-denominated
international reserves held by Bank Negara Malaysia, Prime Minister
Datuk Seri Dr Mahathir Mohamad, said here today.
However, he said that Malaysia would have to see how the euro emerges
as an alternative to the US dollar in international trade.
So far, Malaysia was still unconvinced that the European currency has
gained stature as a lead trade currency to facilitate its wider usage
and a possible alternative to the greenback, he said when responding
to questions on the likelihood of Asian countries like Malaysia stepping
up their usage of the euro.
He told a press conference after the two-day Asia-Europe Meeting (Asem)
which ended today that Malaysia was closely watching euro's performance.
According to Asem officials, it was Dr Mahathir who had asked on the
viability of using the euro as an alternative to the US dollar as well
as the impact and implications to countries if the unit was used as
a mode of settling international transactions during informal talks
with his Asian and European counterparts converged at the Bella Center.
The discussion on euro was contained in the agenda for Asem attended
by 10 Asian countries and 15 members of the European Union (EU) and
the European Commission.
The unit was introduced on Jan 1, 2000 with euro coins and notes only
introduced in January this year in place of the local currencies of
12 EU members.
Over a short period, the currency has shown some level of resilience
after its debut and is now about par with the US dollar.
Initially, it was thought that the euro will always be of higher value
than the US dollar, but actually, the euro depreciated against the greenback
and now it has gained some ground, he said.
"We will look whether it will stay in that range or increase in value
or not, it is very important for us to have an alternative currency
to the US dollar when we trade," Dr Mahathir said.
But there is a tendency now for the value of the goods in euro to be
translated into the US dollar and then converted back into the euro,
which means basically that the euro is not standing on its own, he said.
Dr Mahathir said that what Malaysia would like to see was for the prices
to be quoted in the euro irrespective if the prices quoted in dollar
terms increase.
"We will have to come to the stage where the US will have to adjust
their prices because of the value of the euro," the prime minister said.
For instance, he said that if the euro price for pertroleum is less
(vis-a-vis) the US dollar, then the value in dollar terms should go
down.
"In other words, the euro should lead and the US dollar should follow.
When that happens, I think we will switch (more) to the euro, or at
least carry more reserves in the European currency," Dr Mahathir said.
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