Asian countries should embrace the euro to diversify their currencies and credit risks and to help finance the region's eventual recovery, according to the head of Barclays International Asia-Pacific. At a debt-market conference yesterday in Hong Kong, Roger Davis said the euro would eventually match the United States dollar in terms of market share of currencies used in international trade. For example, the euro bond market was comparable in size to that of the US, he pointed out. 'Asian companies currently face bleak domestic liquidity conditions as regional banking systems rein in their domestic asset portfolios to offset non-performing loans,' Mr Davis said. 'The euro bond market should open up a vital avenue for these companies, allowing them to raise finance overseas and to diversify their risk into a liquid market.' Mr Davis said the euro's emergence would change the pattern of investment in Europe's fixed-income markets. Investors would need to develop a greater appetite for credit risk in these markets in order to outperform market benchmarks, he said. They would also need to move out along the yield curve into longer maturing bonds. Already, the euro appeared healthy, with US$60 billion (about 51.7 billion euros) issued this year, he said. 'I think every indication so far is that while it will fluctuate, there is no reason why it cannot be as strong and stable as the US dollar,' Mr Davis said. But critics of the euro fear the convergence of the 11-member nations with significant variation in economic performance could create an inherently unstable currency. Mr Davis said investors would be observing the currency's movements before plunging in. 'People will be watching closely in the first year or two,' he said. 'There won't be many major moves into the currency in the first couple of weeks,' he said. Barclays believes it will probably be longer still before there is large scale foreign-exchange switching out of the US dollar in Asia after such heavy losses to foreign reserves in the last year.