In ASEAN, a taskforce has be set up to look into the issue. Clearly, with growing regional economic integration, not just within ASEAN but also among the ASEAN+3 countres, enhanced regional financial cooperation would play a beneficial and complementary role. Regional policy makers recognise that a single currency is a long-term option for the region. An important pre-condition for a single currency would be a significant degree of economic and financial convergence and integration. It would also require greater labour and capital mobility in the region. While the single currency may be not in the region's immediate future, this does not preclude greater cooperation on exchange rate issues and other forms of financial co-operation among regional economies. There is indeed potential to benefit from enhanced financial cooperation and for the creation of mechanisms that would enable the region to better cope with periods of highly unstable financial market conditions. Institutional infrastructure such as regional surveillance and financial  BIS Review 62/2002  3  support mechanisms achieved under the Chiang Mai Initiative can be further enhanced over time to provide temporary liquidity support to regional countries and prevent the type of violent exchange rate movements observed during the Asian financial crisis. Such institutional arrangements need to be reinforced with greater regional economic integration. In addition, to encourage part of the financial flows from the region to be recycled into investments in the capital market, efforts have been taken to further develop the capital market, particularly in the area of securitization, credit guarantee and market infrastructure.

Ladies and gentlemen, An important transformation in the international financial landscape is the introduction of the euro which has indeed been a defining event. The objective was clearly to facilitate trade and investment within the region by removing the distortions in economic relationships introduced by exchange rate volatility. As a result, where there were previously 12 currencies, there is now only one. Corporations dealing with the 12 euro countries are now able to keep their books in one set of accounts and make operating and investment decisions without having to be concerned about exchange rate changes. For the rest of the world, it has been described as “island of price stability” in addition to the dollar area, to which capital can flow. Four factors are important in determining a currency's international role: relative stability, which would reduce the risk of holding assets in that currency; a strong exchange rate; so that capital losses can be avoided; deep and liquid financial markets for that currency, to enable holders to diversify, liquidate and adjust their investment portfolios; and finally, a strong regulatory support to minimise the possibility of crises. Indeed, the international success of the euro in coming years would depend on the extent to which these criteria are met. The introduction of the euro has of course given impetus to other regional initiatives to pursue similar efforts to unify national currencies into a single regional currency. Such initiatives are being pursued in Latin America, Africa and the Middle East.