Duraid Durgham, the head of state-owned Commercial Bank of Syria, said on Monday: "This is a precaution. We are talking about billions of dollars. Switching to the euro will help us avoid settlement problems in the United States.
"The move is also needed to avoid complications with our correspondent banks, which have expressed a preference to deal in euro under these circumstances."
Most of the government's foreign currency flows goes through the Commercial Bank, whose US assets were frozen by Washington in 2004 as relations with Syria deteriorated.
The bank, which dominates the Syrian market, also stopped dealing with dollars for international private flows, such as imports, exports and letters of credit, Durgham said.
He said the switch would mean euro pricing for crude oil sales, a major foreign currency earner for Syria.
The latest official figures show Syria imported $6.7 billion goods in 2004 and exported $5.4 billion. Oil output is about 400,000 barrels a day.
In 2004, Washington imposed sanctions that prohibited certain US exports to Syria, severed financial ties with the Commercial Bank of Syria, and froze the assets of Syrians believed to be linked to terrorism.
After the assassination of Rafiq al-Hariri, the former Lebanese prime minister, a year ago, the US led foreign pressure on Syria for its alleged role in the killing.
Damascus denies involvement in the killing but faces the possibility of more sanctions if it is found uncooperative with a UN investigation into the killing of al-Hariri.
Regional financiers said the Syria managed to minimise the damage of US sanctions and deal with economic uncertainty that followed the al-Hariri assassination, including pressure on the Syrian pound.
"This is a precaution. We are talking about billions of dollars. Switching to the euro will help us avoid settlement problems in the United States"
Commercial Bank of Syria
The government, controlled by the Baath party for the past for 40 years, has proceeded with steps to open up the economy after decades of central planning, naming on Monday a board to head up a stock exchange under formation.
Joe Sarrouh, a senior executive at Fransabank in Beirut, said: "To its credit, the government managed to keep the economic cycle going; imports, exports and tourism did not suffer a major blow. The have reacted effectively to pressure."
One economist said the euro move by the Commercial Bank of Syria "looked like a kind of pre-emptive action aimed at making their foreign assets safer and preventing them from getting frozen in case of any conflict".