Prime Minister Dr Mahathir Mohamad today said the euro will strengthen further and urged the Malaysian business community to trade in the currency instead of just the traditional dollar.

"We should try to buy in dollars and sell in euro. We see a trend in euro strengthening," Mahathir told reporters after announcing an ambitious RM7.3 billion stimulus package to offset the impact of Sars and revive the sluggish economy.

Mahathir said the decline in the dollar meant that Malaysia was losing revenue.

"We are concerned about the declining value of the dollar since we are being paid in dollars for our exports," he said. The US dollar had fallen by 30 percent in value since 2001.

RM peg stays

Mahathir, who is also the finance minister, attributed the decline in the dollar to the weak US economy and capital flight from the country.

"The US economy is weakening. They have a lot of problems. Foreign capital is not coming into the US. They (US) are overspending. Arabs are not happy with the US. They are pulling out their funds," he said.

Mahathir again ruled out a review of Malaysia's five year-old currency peg of RM3.80 to the dollar despite the US currency's depreciation.

The ringgit was fixed to the greenback as part of capital controls imposed in 1998 to pull the economy out of recession following the Asian financial crisis. AFP