Snow-Shiokawa double act stirs forex market

TOKYO, March 5: Seemingly harmless remarks can wreak havoc in the merciless world of foreign exchange, where what the speaker says sometimes matters less than what traders think everyone else in the market will make of them.

New US Treasury Secretary John Snow joined a long list of policymakers who learned this the hard way when he spoke about the dollar’s decline, and his Japanese counterpart, Masajuro Shiokawa, showed hours later on Wednesday he still hadn’t got it.

"The dollar is in the marketplace, and everything in the marketplace goes up some and falls some," Snow told reporters late on Tuesday. "It’s within normal ranges. I don’t see anything troubling about it."

Traders took that as a sign Washington was abandoning its "strong dollar" policy and the greenback fell more than half a percent within minutes, sliding to four-year lows within a whisker of 1.10 to the euro and to one-week lows near 117 yen.

It had steadied around 1.0965 per euro and 117.43 yen by 0630 gmt on Wednesday.

Snow’s sin, currency analysts said, was that he believed markets would react rationally to his comment that a certain amount of swing in rates was not uncommon.

"I hope this is not what we can expect going forward," said Michael Wilkins, market strategist at Societe Generale in Tokyo.

"He should realise that the market will hang on to every little word he says, given his position and the fact that the market isn’t 100 percent convinced that the US is dedicated to the strong-dollar policy to the same degree that it was before."

The selling abated after a clarification from the treasury that snow had not wavered from "favoring a strong dollar and sound pro-growth economic policies", but currency traders expect second-guessing to continue.

"Of course, he wouldn’t say explicitly that he wants a weaker dollar, but what he seems to be implying is that he will tolerate a move in the market in that direction," said Takeshi Minami, senior economist at UFJ Tsubasa Securities.

"He may still say a strong dollar is in US interests, but it seems he would not be too worried about some decline."

Snow is not yet in the same league as Japanese Finance Minister Masajuro Shiokawa when it comes to misjudged comments.

Within hours of Snow’s controversial remarks, Shiokawa said the authorities should be wary of intervening in the foreign exchange market — even though Japan has intervened several times this year to stop the rising yen from hurting exports.

"Directly intervening, or manipulating the yen higher or lower, should be avoided," Shiokawa said in Parliament. "But we need to act to correct any sudden movement in foreign exchange."

The need to talk about intervention stems from the dollar’s latest fall, which Shiokawa himself initiated last week by saying the group of seven economic powers had agreed last month to leave rates to market forces.

Few in the markets can forget how Shiokawa’s comments last June about preventing the dollar from falling towards 115 yen triggered a dollar sell-off to six-month lows near that level from safer ground near 120 yen.

Analysts say the lesson is to stick to a standard phrase — something Shiokawa’s lieutenants are well aware of.

Vice Finance Minister Zembei Mizoguchi, who runs a gauntlet of reporters every morning, repeats the same words every time — that exchange rates should reflect economic fundamentals and be stable and that Tokyo will take appropriate action if needed.

Mizoguchi also appears to have opted for action, not words. The Finance Ministry said on Friday it had discreetly sold more than 500 billion yen for dollars and euros last month, the second straight month in which it had conducted "stealth intervention".

Then again, intervention itself may send the wrong message.

"It does reinforce the idea in people’s minds that the yen would strengthen if left to its own devices," wilkins at societe generale said. (AGENCIES)

HK budget-Govt says 2002 GDP rose 2.3 pct

HONG KONG, Mar 5 : Hong Kong’s gross domestic product grew by 2.3 percent in 2002 — ahead of the Government’s own forecast of two percent, Financial Secretary Antony Leung said on Wednesday in his annual budget address.

Leung also said the Government expects consumer prices in 2003 will fall by 1.5 percent from 2002.

The Government had forecast the economy would expand by two percent in 2002 after marginal growth the previous year, when the global slowdown began to bite.

Exports have rebounded strongly in recent months but their effects have not significantly boosted flagging domestic demand. Economists also worry any war in Iraq could curtail trade.

Leung was delivering the 2003/04 budget to legislators. (AGENCIES)

Dollar, stocks dumped for havens on war jitters

SINGAPORE, Mar 5: The dollar sank to a four-year low against the euro on Wednesday after US Treasury Secretary John Snow expressed indifference to its weakness, as preparations for a war against Iraq hit stocks and buoyed gold, bonds and oil.

Growing US tensions with North Korea and deadly blasts in the Philippines deepened the gloom over stocks, which fell to their lowest levels in three years in Australia and in more than a year in South Korea and Singapore.

The Japanese stock market dipped after news of falling US car sales helped send Wall Street’s blue chips to their lowest close in almost five months, but the Nikkei average .N225 clawed back most of its losses to end just 0.1 percent easier.

"It’s very hard to make positive forecasts when you are on the brink of a war — you don’t know how long it’s going to last, what’s going to happen in the aftermath," said Andrew Sekely, fund manager at intersuisse in Australia.

The dollar dived after snow said he was "not particularly concerned" about its recent fall, though it edged back after a US Treasury spokesman said the Secretary still favoured a strong currency.

The euro rose to a four-year peak of 1.0989 and then eased to 1.0972 as europe awoke, still way above its level of around 1.0888 in late US trade. The dollar also fell to a four-year low against the safe-haven swiss franc and lost more than half a yen jpy= to 117.38 yen.

Sentiment towards the dollar remained gloomy on concern about the cost to the US economy of any war against Iraq. A US decision to order 60,000 more troops to the Gulf region on tTesday heightened suspicions that a war could be imminent.

Gold jumped on the weakness in the dollar and worries about Iraq and North Korea, rising to 355.00 an ounce from 352.55 in New York.

Bonds also drew support from investors seeking less risky investments, with yields on 20-year Japanese Government bonds hitting a four-year low and US Treasuries nudging higher.

Oil was little changed after rising nearly three percent on Tuesday on worries a war would exacerbate a shortage of crude supplies. US light crude was up five cents at 36.94 a barrel.

"We’re looking for crude to move above 40 when the attack is launched on Iraq. Even if OPEC does increase production we still see supplies remaining tight," said Tetsu Emori, chief strategist at Mitsui Bussan Futures in Tokyo.

The prospect of a conflict also weighed on Asian stocks after US stocks dropped on worries slack consumer spending will hurt the economy.

"I think increasingly we see people are more concerned about the economic health of the US some of the geopolitical risks have been discounted by the market," said Teng Ngiek Lian, chief executive at Target Asset Management in Singapore.

Car stocks sank on news US auto sales declined for a second month in February. Nissan Motor and Mitsubishi Motor slid five percent in Japan, while South Korea’s Hyundai Motor Co slumped 7.5 percent.

Tokyo’s Nikkei average closed 0.1 percent lower at 8,472.62. Australia’s benchmark index dropped 1.3 percent to its lowest since October 1999.

South Korean shares fell 2.8 percent to a 16-month low after the United States sent bombers to the pacific to deter any aggression by North Korea in the event of a war in Iraq.

"Day after day we are left with growing uncertainties over Iraq and North Korea,"said Shin Yoon-Bum, fund manager at Dongbu Investment Trust management.

Taiwan fell 1.8 percent to a four-month low. Hong Kong was off 1.1 percent at midday, while a loss of just 0.2 percent was enough to push singapore to an 18-month low by lunch.

Shares in the Philippines slid 1.6 percent after bombs in the south of the country killed at least 19 people, unsettling investors worldwide. The Philippine peso fell to a 25-month low.

On Wall Street, the Dow Jones industrial average sagged 1.7 percent to 7,704.87 and the Nasdaq composite lost one percent to 1,307.77. (AGENCIES)

Sindbad lives again, smuggling Iraqi oil

BASRA, IRAQ, Mar 5: Sindbad the sailor is back. This time his name is Khalid and he is smuggling oil.

Instead of dodging killer birds, serpents and sea monsters like the mythical merchant who set sail from Basra, Khalid manoeuvres his vessel past US navy ships patrolling the Gulf with a cargo of fuel oil that fetches up to a half a million dollars in profit.

"We follow oil tankers then make a run for it when the Americans get busy with them. They fire in our direction sometimes, but we don’t panic," Khalid told media as he watched welders put final touches to the hull of his new ship, Al-Tareq.

Similar to the rest of a smuggling fleet estimated at hundreds of ships, Khalid’s vessel is completely hand built using scrap steel, the drive shafts of junk cars and the overhauled engines of decommissioned French or East German trains.

Soaring oil prices, driven by the likelihood of a second Gulf war, have made smuggling oil in contravention of 12-year-old UN sanctions imposed on Iraq after invading Kuwait more profitable than ever.

They are driving a boom in a ship building and breathing activity into Basra, the historic port ravaged by years of war and neglect by the Central Government.

"The Government has been an encouraging factor. It is giving us the oil and making scrap steel available to use. We are proud of breaking the embargo," Khalid said.

Iraq is allowed officially to sell oil through the United Nations under a 1996 agreement which stipulates that the proceeds are spent on food, civilian goods and war reparations.

But the oil-for-food deal has been hard to enforce. Diesel was sold for years to Turkey through Iraqi Kurdistan and a pipeline carrying crude oil to Syria resumed operations several years ago.

Basra, which lies on the Shatt Al-Arab, Iraq’s main outlet to the sea, is taking a significant slice of the illicit oil trade. Empty plots in the city and further to the south on the Shatt Al- Arab are being turned into makeshift oil shipyards.

Cheap labour helps. Welders, most of whom come from Iran across the Shatt Al-Arab, earn 7 a day. Unskilled workers get 75 cents daily and the guard at the Basra shipyard where Al-Tareq is being readied gets 15 a month.

Sheets of metals are welded to the frame, and the whole ship rests on the rims of tyres. The differential of a car serves as the steering mechanism and truck parts form the propellers’ final drive.

Design also appears to be commissioned on the cheap. "The guy who drew this can barely read or write, but the ship can sure manoeuvre," Khalid said.

Smugglers load the oil along distribution points in Khor Amaya bay, which separates Iraq from the Kuwaiti island of Bubiyan. The ships then sail past the Iraqi Al-Faw peninsula before delivering the cargo to middlemen waiting at sea or at small ports in the Gulf. In another shipyard further south on faw, a welder was cutting a semi-circle through rusty sheet metal.

"This is the rudder. Don’t worry, it is stronger than it looks," said Shihab, the future captain of the ship under construction.

He insisted the vessel was a fishing boat but a look inside the hull revealed only tanks, no refrigerators or fishing gear.

The ships can be up to 196 feet long and eight storeys high. Because they are made from cheap recycled material their loss can be absorbed if they are confiscated.

The US navy, which has been massing in the Gulf ahead of a possible invasion of Iraq, is anchored at the edge of Iraqi territorial waters off faw. The Iraqi coastline on the Gulf is only 15 km long.

Iranian boats have also been stepping their patrols in search for illegal Iraqi oil, though many of the middlemen who buy it are Iranians, smugglers say.

The chance of getting caught stands at 70 percent per voyage compared to 10 percent before the United States and Britain stepped up their military build-up in the Gulf few months ago, according to Khalid.

"The Iranians are particularly merciless," Khalid said. "One successful voyage is enough to make me a fortune, but the temptation is always to go back for more. It is always handy to own more than one ship."

Mobile cranes were being readied to lift Al-Tareq and lower it into a canal of water that leads to the Shatt Al-Arab a short distance away.

The atmosphere in Basra reeks of deprivation. Ship building is one of few signs of economic activity in the city. Basra is surrounded by oil wells but most of its two million Muslim Shi’ite population live in abject poverty.

Buildings in the city are still scarred by machine guns and grenades used during a 1991 uprising that was crushed by the Sunni-dominated Government

Basra was once renowned for importing spices from India and exporting leather and dates, but the port has been closed since the 1980-1988 Iraq-Iran war.

Sailors say sediment has built up where the Shatt Al-Arab meets the Gulf, restricting movement of big ships to the port further up the waterway. Iraqi shipping traffic has been diverted to the nearby Um Qasr port on Khor Al-Zubayr bay.

"In the 1970s Basra was what Dubai is today — cosmopolitan and a trading hub for the Gulf," says one resident. "I learnt English by picking it up on the street."

An end to the UN sanctions could improve the economy of Basra and return the Shatt Al-Arab as the main navigational channel, but it would destroy the oil smuggling trade.

"This risk is at the back of our minds," said Khalid. "We can always go back to smuggling cattle. Iraqi goats are still in demand all over the Gulf." (AGENCIES)

UNEP inks 7.6 m dollars deal with Syndiacate, Canara banks

NEW DELHI, Mar 5: The United Nations Environment Programme (UNEP) has signed a 7.6 million dollars deal with the Syndicate Bank and the Canaral Bank to help household finance clean and reliable electricity for solar power at cheaper rates.

The UNEP will be "buying down" the financing cost of photovoltaic solar syster, enabling the households purchase systems at an interest rate of approximately 5 per cent against the normal lending rates of 11 to 12 per cent. The agreement to this effect was signed yesterday.

The two public sector banks have begun offering new loans in the southeren state of Karnataka.

The UNEP programme is made possible with support from the United Nations Foundation (UNF) and shell foundation, says a press statement issued here today.

UNEP executive director Klaus Toepfer said, "this initiative helps to meet both environmental and development objectives by overcoming a major barrier to increasing the use of renewable energy - access to finance."

Many households still rely on inefficient and polluting energy sources such as kerosene, which produces negative health, environmental and social impacts.

In Karnataka, even where grid electricity is available, problems of capacity shortages and inconsistent quality plague the power supply. This has led households to look to alternative power supply systems such as solar or diesel generators.

Despite high initial costs, solar home systems emerge as an attractive option in the context of costly or unreliable alternatives and escalating grid power tariffs and therefore a growing number of households are turning to solar as a matter of necessity and convenience.

But financing their high initial cost is a major barrier and one where southern India’s well-developed banking sector can play a leading role.

The UNEP partnership will allow both banks to offer new loan products for the growing renewable energy sector through an extensive and established network of rural branches in the states of Karnataka and Kerala. The two banks also finances group lending through linkages with self help groups, and hence can advance loans to the poorest.

By combining two banks and a number of UNEP-qualified solar home system vendors, UNF president Tim Wirth said the programme was a market-driven approach designed to stimulate competition among vendors and ensure quality products, competitive pricing and reliable after-sales service.’’

Shell Foundation’s president Kurt Hoffman said clean and reliable forms of energy "can improve access to education and communications, protect health and environmental values and promote economic growth - all necessary to alleviate poverty." (UNI)

Sensex dips 44 pts as equities reel under selling pressure

MUMBAI, Mar 5: Equities, across the board, fell further towards afternoon at the local bourses today as the growing geopolitical tension and fear of a regulatory move to curb portfolio investment, continued to hurt the sentiment.

The 30-stock, Bombay Stock Exchange (BSE) sensex was down sharply by 44.41 points at 3,200.39 as compared to 3,244.80 of its previous day’s close, while the CNX nifty of the National Stock Exchange (NSE) fell by 14.55 points to 1,032.05 from 1,046.60 of its previous close.

The weakening trend in the Asian markets today after a second day slump in Wall Street on growing US tensions with North Korea and deadly blasts in the Phillipines, dampened the investor confidence at the local bourses as well, triggering heavy sell-off across the board, a broker said.

Technology stocks continued to reel under pressure after sharp fall in US Nasdaq and persistent war concerns. The fear of another US legislation against business outsourcing to India also pressured software stocks.

The market regulator, SEBI’s clarification that it has no plans to curb FII trade via participatory notes, failed to improve the sentiment as players focussed on weakening global trend and the persistent West Asia tension.

Among the major losers, Infosys was down by 0.81 per cent at Rs 4,122.70, Satyam 1.28 per cent down at Rs 215.15, Reliance 2.46 per cent down at Rs 285.30, Hindalco 2.66 per cent down at Rs 575.95, Wipro 1.23 per cent down at Rs 1394.00, SBI 2.03 per cent down at Rs 282.15, HPCL 2.47 per cent down at Rs 301.65, ACC 1.37 per cent down at Rs 147.90, TELCO 1.60 per cent down at Rs 153.60 and HLL 1.90 per cent down at Rs 165.20.

Reports from Singapore said the growing US tensions with North Korea and deadly blasts in the Phillipines deepened the gloom over stocks, which fell to their lowest levels in three years in Australia and by more than a year in South Korea and Singapore.

The Japanese stock market dipped after news of falling US car sales helped send Wall Street’s blue chips to their lowest close in almost five months, but the Nikkei average clawed back most of its losses to end just 0.1 percent easier. (UNI)

India-US bilateral trade zooms in 2002

WASHINGTON, Mar 5: Despite American concern over trading with India due to heightened tensions in the subcontinent, merchandise exports from India to the US has risen by 21.4 per cent in 2002 to 11.82 billion dollars, the highest in past decade, the US Commerce Department said.

"This strong performance reflects the highest annual percentage growth in Indian exports to US over the past decade," an Indian embassy release said.

"It is particularly noteworthy as it has occurred against a backdrop of lackluster growth in worldwide exports to USA in 2002, and despite concerns over trading with India due to heightened tensions in the subcontinent and travel advisories against visiting India that were briefly in place during mid 2002," it said.

India has emerged as the 19th largest merchandise exporter to USA in 2002 (up from 22nd position in 2001) with a 1.02 per cent share of total us imports (up from a 0.86 per cent share in 2001).

"Year 2002 marks the first year that India has entered the list of top 20 countries exporting to USA; it is also the first time that India’s exports to USA have exceeded one per cent of us merchandise imports," the Commerce Department said.

"It also marks the first time in recent years that the rate of growth of Indian merchandise exports to USA (21.4%) has outpaced the rate of growth in our India’s services exports to USA (20%).

Growth has been more or less across the board for major Indian export. Nine of the top ten items that India exports to USA witnessed growth, the release said.

India is now the number one exporter to USA of small and medium-sized diamonds ($2.6 billion), knotted and woven carpets ($384 million), linen ($366 million), large/medium sized frozen shrimp with shell-on ($220 million), cashewnuts ($213 million), antibiotics ($138 million ), woven silk fabrics ($85 million), pepper ($32 million), opium ($31 million, guargum ($23 million), psyllium seed husk ($22 million), woven jute fabrics ($14 million), and niger seed ($10 million).

During 2002, worldwide merchandise exports from USA dipped by -4.9% compared to 2001, declining to 21 of the top 30 US export destinations.

It grew to only nine amongst them, including to India.

Growth in the US exports to India was 9.1 per cent and is particularly commendable when viewed against the backdrop of a -4.9% decline in overall US exports. (PTI)

MoU between Germany, AP Govt signed

HYDERABAD, Mar 5: A Memorandum of Understanding (MoU) was signed this evening between the Andhra PrGdesh government Gnd german agency for technical cooperation in the setting up of an Indo-German Institution for Advance Technology at Visakhapatnam.

Mr P Acharya, Secretary Industries and Commerce, Government of Andhra Pradesh and Mr D J Hahn, Senior Advisor, Information Technology, signed the MoU in the presence of Chief Minister N Chandrababu Naidu and German President Dr Johannes Rau.

Addressing the gathering at Hitex, the new Modern Trade Fair Centre at Madhapur, near the hi-tec city here, Mr Naidu said Andhra Pradesh was looking forward to establish joint ventures in the fields of IT and biotechnology in the near future between Germany.

He said Andhra Pradesh had achieved rapid transformation in the field of it and bio-technology, established world recognised institutes like Indian Tnstitute of Excellence and IIIT. Earlier, there were only 32 engineering colleges in the state with an intake of 8000 students. Today there are 220 engineering colleges with an intake of 65,000 students, he pointed out.

Mr Naidu said the Computer Society of India had awarded Andhra Pradesh as the best state with regard to IT development. The state had also been acknowledged as the best biotechnology state in the country besodes. A genome valley on 65 acres was coming up near the city.

Earlier the German President and his delegation went round an exhibition showcasing advancements in IT and other related fields. (UNI)

FM replies to over 200 e-mail queries on budget

NEW DELHI, Mar 5: Finance Minister Jaswant Singh has replied to more than 200 e-mail queries he received on the Union Budget for 2003-04.

He has introduced this programme to encourage public participation in the budgetary process.

The ministry of finance and company affairs has made arrangements to react to such queries by posting replies on its website. The ministry welcomed the public to actively participate in this interactive process, an official spokesperson said. (UNI)

| home | state | national | business | editorial | advertisement | sports
| international | weather | mailbag | suggestions | search | subscribe | send mail |