TOKYO (Dow Jones)--The new Asian Bond Fund will have to reduce reliance on the U.S. dollar as the greenback "isn't a stable currency at all," Malaysian Prime Minister Mahathir Mohamad said Thursday.
Although the regional fund has little choice but to use the dollar at first, "we need to rethink whether we can depend on the U.S. dollar," he said at the Nikkei Future of Asia 2003 conference.
"We should gradually wean ourselves from the U.S. dollar."
Asia-Pacific central banks Monday announced plans to pool $1 billion out of their foreign reserves to buy Asian government bonds in a bid to promote the region's bond markets and reduce dependence on foreign capital.
The group of the region's central banks known as Executives' Meeting of East Asia and Pacific Central Banks said the fund will buy "a basket of U.S. dollar-denominated bonds issued by Asian sovereign and quasi-sovereign issuers" from China, Hong Kong, Indonesia, South Korea, Malaysia, the Philippines, Singapore and Thailand.
Earlier, he also repeated his long-standing sentiment against currency traders, whom he has faulted in the past for the onset of the Asian financial crisis in 1997-1998.
During the crisis, regional governments were forced to allow their currencies, which had been pegged to the dollar, to float freely. The subsequent plunge in their values also caused their economies to tumble. Malaysia, however, pegged its ringgit to the dollar at a fixed rate of $1=MYR3.80.
Mahathir said he would like to be able to fix the ringgit to the euro, but that doing so would be difficult now as regional neighbors conduct so much of their trade in dollars.
-By James Simms, Dow Jones Newswires