SIX leading Arab economies, including Saudi Arabia, may reconsider pegging their currencies to the dollar, under their plans for a “euro-style” Arab single currency in the region.

Muhammad Al-Jasser, Vice-Governor of the Saudi Arabian Monetary Agency, the country’s central bank, told The Times that the six oil-exporting nations — Saudi Arabia, Kuwait, Bahrain, Qatar, Oman and the United Arab Emirates — could link the proposed single currency to the euro, or to a basket of currencies.

“We have to decide if it will continue to be pegged to the dollar or if we will do something else,” he said, making clear that: “Nothing is ruled in or out.”

Under proposals for an Arab single currency, first mooted in 2001, the six countries in the Gulf Co-operation Council are expected to take the next steps towards monetary union next year, paving the way for a launch of the currency, possibly called the dinar, by 2010.

As a first step, all six countries pegged their existing currencies to the dollar in 2002 in a move that reflected the fact that oil prices are denominated in dollars. But the dollar’s slide on currency markets has triggered speculation over a rethink. Since 45 per cent of the six states’ imports come from Europe, the euro’s rise against the falling dollar has ratcheted up their import bills, potentially making an alternative peg arrangement more attractive.

The increased attractiveness of a stronger euro to Arab states was underlined yesterday as the UAE said that it might convert 5 per cent of its foreign currency holdings from dollars into euros.

But Prince Alwaleed bin Talal, the billionaire Saudi investor, cast doubt yesterday over a change in the states’ existing dollar peg. “Denominating in US dollars is the best scenario. The US economy has proven beyond doubt that it is the locomotive for growth of world economies,” he said.

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