Magazine article Business Asia

Will Asia Dump the Dollar? (Frontline)

Magazine article Business Asia

Will Asia Dump the Dollar? (Frontline)

Article excerpt

If there's any leader in Asia who'd like to reduce US influence it's Mahathir Mohamad.

Malaysia's prime minister wonders if he's found a way to do just that: Dumping the US dollar.

Asia's longest-serving leader has never been shy about blasting Washington's hold over his and other economies in the region. Mahathir's misgivings about Western-style capitalism reached a fever pitch during the 1997-1998 Asian crisis, and still slip out here and there.

It's in that spirit that he's increasingly raising the issue of using Europe's single currency instead of the dollar. "It's very important for us to have an alternative currency to the dollar when we trade," Mahathir said last month.

In Copenhagen last month, European Union and Asian leaders agreed to form a taskforce to promote closer economic ties. One of its roles is to help Asia boost euro currency reserves, issue more euro-denominated debt and use the single currency to settle trade bills. The dollar dominates each area.

Economic merit

Reducing the dollar's dominance appeals to other Asian leaders. It also has some merit on economic grounds. But that doesn't mean it'll be a viable strategy anytime soon. Such a shift could be further off than Asia hopes.

Mahathir has valid reasons to be concerned about the dollar's role. In the age of globalisation, where goods are exported, imported and in many case re-imported, it makes sense to make payment in the currencies with which you transact. At a minimum, it would lower costs for Asian importers and exporters when they do business in Europe.

"It certainly lessens risk if they diversify currencies," says Karen Hawkett, a Sydney-based economist at Stone & McCarthy Research Associates.

Reducing Asia's reliance on exports to the US is another plus. Anyone wondering about the health of Asia's economies need look no further than the West Coast of the US. …

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