Friday June 26, 2009

KARACHI: Rates moved both ways on the currency market on Thursday as supply position was matching with demand, money experts said. On the interbank market the rupee recovered 13 paisa in relation to the dollar for buying at 81.42 and 14 paisa for selling at 81.46, dealers said. Dollar supply was good which helped the rupee to look ahead in terms of dollar, they added.

Amid fourth Asian trade session dollar edged off stronger levels hit after the Federal Reserve meeting, while yen fell as the market weighed up whether to resume rallies in riskier assets. The Fed kept to its debt buyback programme and signalled it was less concerned about deflation, but it also said inflation would remain subdued for some time and interest rates would stay low for an extended period.

Open Market Rates: The rupee failed to retain its overnight level versus dollar, losing 10 paisa for buying at 81.40 and selling at 81.70, they said. The rupee gained 70 paisa against euro for buying at Rs 112.55 and Rs 113.55 for selling, they said.

Open Buying Rs 81.40
Open Selling Rs 81.70
Interbank Closing Rates: Interbank Closing Rates For Dollar On Thursday.

Buying Rs 81.42
Selling Rs 81.46


(BRecorder)

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Friday June 26, 2009

MUMBAI: The Indian rupee ended slightly weaker on Thursday, surrendering early gains as the stock market turned negative and as importers bought dollars to meet month-end commitments. The partially convertible rupee ended a choppy session at 48.595/605 per dollar, just below Wednesday's close of 48.56/57. From an early high of 48.46, the rupee fell as far as 48.73.

On Tuesday, it had hit 48.90, its lowest since mid-May. "The month-end demand is also picking up. But stocks remain the main trigger," a senior dealer with a foreign bank, said. The rupee has rebounded from a record low of 52.2 in early March as foreigners bought around $7.5 billion of stocks in three months as the main index rose more the 90 percent.

(Reuters)

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Friday June 26, 2009

LONDON: The bank-to-bank cost of borrowing euros fell by the most in six months on Thursday and analysts expect further falls in months ahead as the European Central Bank's latest liquidity boost takes effect. London interbank offered rates (Libor) for three-month dollars also marked a lifetime low after the Federal Reserve kept interest rates steady.

But the heftiest moves were in euro rates as funds from the ECB's first-ever one-year tender started to flow. The eurozone's central bank lent banks 442.24 billion euros, stepping up efforts to revive interbank lending that has been crippled by the financial crisis and is one major barrier to a return to economic growth.

The ECB hopes its biggest money market operation ever will give enough financial security to spur banks to make more long-term loans to companies and consumers. The three-month London interbank offered rate for euros fell 4.2 basis points to 1.14250 percent while overnight euro Libor rates slumped by almost a full percentage point to a record low.

However, the overnight rate had been pushed higher in the previous session as banks sought stop-gap funds until they got the one-year money. This followed a drop in the three-month Euribor - traditionally the main gauge of interbank euro lending and a mix of interest rate expectations and bank's appetite for lending - to a lifetime low of 1.145 percent, close to the ECB's refi rate of 1 percent. "We've seen three-month Euribor fixings fall to a new record low today and we think that will continue," Christoph Rieger, an analyst with Commerzbank/Dresdner Kleinwort.

Sounding a cautious note, ECB Governing Council member Christian Noyer said on Thursday money markets are generally improving though they are not quite back to normal. Commercial banks overnight borrowing from the ECB jumped to an eight-year high as banks awaited funds from the one-year auction.

Meanwhile, three-month dollar Libor continued falling after the Fed signalled it will keep its policy rate in a zero to 0.25 percentage range for "an extended period". The rate gap between three-month T-bills and three-month dollar Libor was at 43 basis points from 41 basis points in late trading on Wednesday.


(Reuters)

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Friday June 26, 2009

LONDON: Sterling fell against the dollar and euro on Thursday as caution about Britain's economic outlook and weak share prices weighed on sentiment. Equity markets were broadly lower, with London's FTSE stock index down more than 1.0 percent in afternoon trade. Concerns about the economy were fanned the previous day by comments from Bank of England policymakers and a bleaker forecast by the OECD.

"The OECD forecasts and BoE comments are holding sterling back a bit," said Ian Stannard, senior foreign exchange strategist at BNP Paribas. "But the overall environment for risk appetite is favourable, and that should be favourable for sterling." Sterling slipped to a session low of $1.6234. By 1336 GMT, it was down 0.8 percent at $1.6265.

Traders said the pound's decline was accelerated when stop-losses were hit near $1.63 and below. Key technical support is seen around $1.6180. Bank of England Governor Mervyn King said on Wednesday that economic recovery could still be a "long, hard slog" despite encouraging recent data, in a sign that the central bank is in no hurry to tighten policy.

The Organisation for Economic Co-operation and Development forecast that Britain's economy will shrink 4.3 percent this year, its fastest pace of decline since World War Two, and stagnate in 2010. The dollar edged up as risk sentiment was soured by data showing US jobless claims unexpectedly rose in the past week.

The euro was up 0.7 percent at 85.52 pence, stuck in a recent range between 84 and 86 pence. "Despite comments on sterling weakness, we expect euro/sterling will remain rangebound around 86 pence in the medium-term," said UBS analysts in a note.

The euro was also buoyed after the Swiss National Bank was seen buying large amounts of euros on Wednesday to stem a rise in the Swiss franc, and allegedly again on Thursday. Currency intervention has been a part of the Swiss central bank's easing policy since March.


(Reuters)

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Friday June 26, 2009

BEIJING: China plans to unveil a fresh package of policies to drive growth in its vast underdeveloped western regions as the "Go West" policy goes into its second decade, a senior official said on Thursday. Worried by the yawning wealth gap between booming eastern coastal areas and the less developed central and western provinces, Beijing launched the policy in early 2000 to promote development in its interior, giving incentives to invest and work there.

"The current 'Go West' policies will be in force until 2010, so we are working on new policies to further push ahead the development of western regions," Li Yingming, deputy head of the department of western region development under the National Development and Reform Commission, told a news conference. The new set of policies would probably be announced around the end of this year, she said.

Despite the decade of efforts to shift growth inland, and an acceleration of those efforts in the past few years, average incomes in the interior lag far behind those in coastal areas.

For instance, average annual wages among urban workers in western Gansu province, at 20,700 yuan ($3,030), were less than half those in the capital Beijing in the latest published data. Apart from spending more on rural infrastructure and subsidies, the current leadership has abolished the centuries-old agricultural tax, made compulsory education free in the countryside and set up a rural medical insurance scheme. Recently, the central government has allowed local governments to issue bonds for the first time and has given western and central provinces bigger quotas than those in the east.


(Reuters)

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Friday June 26, 2009

NEW DELHI: India's wholesale prices fell less than expected in mid-June from a year earlier, marking a build-up in price pressures as the economy picks up and the effect of past sharp falls in energy prices wears off. The wholesale price index fell 1.14 percent in the 12 months to June 13, compared with analysts' median forecast of a 1.69 percent drop and the previous week's 1.61 percent decline, government data showed on Thursday.

Wholesale prices are expected to keep falling in annual terms in weeks ahead and economists expect the central bank to keep its interest rates low in the near term. But the data reinforced expectations that the closely watched wholesale price gauge will start climbing again from September onwards and some analysts say the rise will be steeper than earlier thought, possibly prompting a rate rise by year-end.

"What this means is that the patch of negative annual WPI (wholesale price index) will be shortened," said D.K. Joshi, principal economist of rating agency Crisil. "Interest rates stance will remain soft. There could be a mild reduction," he said on short-term outlook.

Markets track the wholesale price index more closely than consumer prices because it covers a wider range of products and is published weekly while consumer price reports are published monthly. The 5-year bond yield rose 2 basis points to 6.58 percent after the data, while the benchmark stock index rose, before slipping back into the red in afternoon trade.

The annual declines in prices result from the comparison with last year's elevated price levels reflecting soaring oil prices, which peaked in mid-2008. But wholesale prices have been rising on a week-on-week basis since March, reflecting a revival in demand in Asia's third largest economy. Annual consumer price inflation climbed to 8.7 percent in April from 8 percent in March though it was still below February's 9.6 percent level.

Analysts said that with the statistical base effect set to fade away and concerns about food supply because of lower than normal rainfall this year, wholesale price inflation may spike above the central bank's estimate for the end of the fiscal year to March 2010. Following the data analysts pegged the rate at 5.5-8 percent compared with the central bank's earlier 4 percent forecast.


(Reuters)

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Friday June 26, 2009

LONDON: Troubled British Airways said Thursday that 800 staff had agreed to work for free for up to one month, forming part of almost 7,000 workers who had accepted pay cuts to help the carrier slash costs.

(Reuters)

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Friday June 26, 2009

BRUSSELS: Eurozone industrial orders plunged by more than a third year-on-year in April, a record decline led by capital and intermediate goods that pointed to continued contraction of the economy, data showed on Thursday. Orders fell 1.0 percent month-on-month for a 35.5 percent annual drop, European Union statistics office Eurostat said. Economists polled by Reuters had expected a flat monthly reading and a 32.3 percent year-on-year fall.

"If you play the 'green shoot' game, it is better to avoid the hard data," said Martin van Vliet, economist at ING. Sentiment surveys have shown improvement in business confidence suggesting the worst economic downturn since World War Two was bottoming out in what economists dubbed the "green shoots" of a recovery. "The April industrial orders figures serve as a timely reminder that economic activity in the 16-country region is still contracting noticeably," Vliet said.

The economy of the 16 countries using the euro shrank 2.5 percent quarter-on-quarter in the first three months of the year and the European Commission expects it will contract another 0.6 percent in quarterly terms in April-June. Orders for intermediate and capital goods, which reflect on investment trends, fell 38.3 percent and 39.1 percent annually respectively, underlining the depth of the economic recession. Orders for durable consumer goods dropped by 26.0 percent in annual terms and non-durables by 8.9 percent. But economists noted that adjusted for falling producer prices, the new orders data was less grim.

"In real terms, the new orders have been positive in February and in March and in April, it looks like it's only a small, or negative number, so orders are at the bottom at the moment," said Joerg Angele, economist at Bayerische Landesbank. "So we think we will see some increases in the next month," he said. Depleted inventories should also help boost orders. The latest euro zone Purchasing Managers' Index also pointed to a brighter future, economists said.


(Reuters)

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Friday June 26, 2009

WASHINGTON: Fresh signs of weakness in US job markets on Thursday underlined the strains faced by a recession-struck US economy that contracted slightly less in the first quarter than previously thought. The Labour Department said the number of US workers filing new claims for unemployment benefits last week jumped unexpectedly by 15,000 to a higher-than-forecast, seasonally-adjusted total of 627,000.

Continued claims, which gauge how many Americans were still on jobless rolls after an initial week of claims, rose 29,000 to 6.738 million in the week ended June 13, the latest period for which the data was available.

The worse-than-expected jobs data outweighed a Commerce Department report showing gross domestic product, the gauge of total output within US borders, contracted at a 5.5 percent annual rate in the first quarter instead of 5.7 percent. That followed contractions in national output of 6.3 percent in last year's fourth quarter and 0.5 percent in the third quarter. The first estimate for second-quarter US economic performance will not be available for another month.

Despite the weak tone of the data, Wall Street stock prices rose modestly in early trading, while shorter-term bond prices gained in a sign of investor caution about economic prospects. The GDP figure was the final reading for the first quarter. The Commerce Department initially said it shrank 6.1 percent, then revised that to 5.7 percent and finally to a 5.5 percent fall.

It is expected to slip again in the second quarter ending June 30, though less severely than in the first quarter. The GDP report reflected an economy still deep in recession when 2009 began. But a report by the Paris-based Organisation for Economic Co-operation and Development this week predicted the US downturn will bottom out this year and be followed by a soft recovery in 2010.

Continuing layoffs and problems in finding new jobs are shrinking incomes while weaker housing and equity markets sap wealth, making it unlikely that consumers will be able to provide much spending power. At the same time, the GDP report showed weak business investment.

Consumer spending that fuels two-thirds of US economic activity, increased only at a 1.4 percent rate instead of the 1.5 percent previously estimated. On the plus side and helping to account for the fact that GDP shrank less than first thought, the government said companies cut inventories at slightly less vigorously rate in the first quarter than it previously estimated. Business inventories declined at an $87.1 billion rate instead of $91.4 billion, meaning they subtracted less from growth.

Reflecting the weak pace of global economic activity, exports fell at a 30.6 percent rate in the first quarter instead of the 28.7 percent estimated a month ago. That was the steepest drop in foreign sales in 40 years. Imports dropped at a 36.4 percent rate, the steepest since the summer of 1947. The department said the drop in exports cut 4.16 percentage points from GDP.

Overall business investment plunged at a record 37.3 percent rate during the first quarter, while spending on homebuilding fell 38.8 percent for its biggest quarterly tumble since early 1980. Nonetheless, corporate profits grew at a 1.4 percent rate during the first quarter, slightly better than the 1.1 percent rise estimated a month ago, after falling 10.7 percent in the final three months of last year.


(Reuters)

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Friday June 26, 2009

TOKYO: Japanese Prime Minister Taro Aso vowed Thursday to do more to pull the world's second-largest economy out of a recession, as he apparently tried to raise his approval rating before looming elections. Aso, who has introduced a series of stimulus measures aimed at sparking a turnaround since taking office last September, said that earlier steps have proven effective but ``not enough.'

He promised further measures, including support for young people who are out of jobs, as well as educational allowances for families with school children. The prime minister, who faces a vote by September at the latest, also called for more funding to cover ballooning social security costs. He said the government plans to go ahead with a consumption tax hike in 2012, only if the economy is back on track.

``People are not just worried about the current economic slump. They are concerned about many other things about our society,' Sao said. `We must address their concerns, one at a time.' The graying of society and the low birth rate is expected to strain government services and pension programs, as well as lead to labour shortages in the near future.

``Before heading into elections, I had to show how we plan to create a society that offers peace of mind,' Aso told a news conference. ``We'll win the elections and do the utmost to achieve the goal.' Aso refused to give the election schedule but said he planned to call a vote ``before long' rather than waiting until the lower house ends its term.

Polls showed support ratings for Aso's Cabinet drop to the single digits in February, but they have since recovered somewhat to around 20 percent. Another embarrassment hit Aso this week, as Economy Minister Kaoru Yosano faced an allegation that his political organisation accepted questionable donations from an investment company. Yosano denied any wrongdoing. Aso's Cabinet has lost three ministers over separate scandals and a policy dispute.

Candidates backed by the rival Democratic Party of Japan have won four out of six local elections this year, including the mayoral seat in the city of Chiba, near Tokyo, earlier this month. The opposition is well-placed to make major gains or even rise to power in the upcoming general elections. Aso's Liberal Democratic Party has governed Japan for virtually all of the past 50 years.

Since late last year, his government has endorsed several stimulus measures, including the latest $150 billion package that consists of programs to bolster consumer spending and incentives to buy energy-efficient appliances and cars, as well as help for the unemployed and small businesses.

(AP)

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Friday June 26, 2009

KARACHI: Romania is Pakistan's important trading partner within the European Union (EU) and the bilateral trade between the two countries has surged to $63.80 million in 2008-09. This was stated by Commerce Minister Makhdoom Amin Fahim on Thursday, while talking to the leader of six-member delegation and Director General, Asian Department of the Foreign Affairs of Romania, Gheorghe Margheru at his office.

According to information reaching here Thursday, Secretary Commerce Suleman Ghani and other officials of the Ministry were present on this occasion. The minister expressed a desire that increased interaction of businessmen and contacts on officials' level between the two friendly countries would provide an opportunity to identify areas of mutual interests.

The delegation was told that Pakistan attaches greatest importance to its trade relations with the EU, which was the single largest trading partner accounting for 27 percent of county's exports and 17 percent of total imports. The trade volume had been doubled in the last five years, the delegation was told. The visiting Director General expressed that like Pakistan, Romania was also located at a strategic point of Black Sea in Eastern European.

He underlined the need for exploring the potentials in trade and Commerce at bilateral level as well as on the EU forum. The Minister pointed out that since Romania was a member of EU, Pakistan would like to have its meaningful support at EU level, besides bilateral partnership.

The recently held first Pak-EU summit in Brussels was a clear indication of broadening the commercial relations between EU and Pakistan. Pakistan's major exports to Romania include material of animal origin, cotton fabrics and articles of textile materials, while the imports include oil seeds, iron and steel manufactures and machinery.


(APP)

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Friday June 26, 2009

ISLAMABAD: Managing Director Pepco Tahir Basharat Cheema has said the government has not decided to increase electricity tariff. Talking to a private TV channel, he said, "So far the government has not decided to bring any change in the existing power tariff".

The MD said,"Pepco has received order to increase its efficiency, pace up recovery campaign, bring the trend of power theft to a halt, so consumer could have the least burden even if there is no other option left to increase the power tariff." To a question, he said, the government had allocated Rs 65 billion during last fiscal year to pay subsidy on electricity. However, he said Rs 30 billion has been allocated in budget 2009-10 for subsidy on electricity.

To another question, he said, KESC would pay Rs 22 billion to Wapda while the government had estimated that it would be able to get Rs 10 billion from Fata. Cheema said Wapda was facing 33 to 35 percent of line losses in Sindh, Quetta and Peshawar. He said Wapda was making efforts to control line losses so that minimum burden could be shifted to consumers.


(APP)

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Friday June 26, 2009

WASHINGTON: The US Senate on Wednesday approved a bill to triple civilian US aid to Pakistan, a bid to cement a long-term partnership and defeat Islamist fighters threatening the nuclear-armed ally's stability. Lawmakers unanimously approved the plan. The package provides 7.5 billion dollars in humanitarian and economic aid over five years, recommends that level for another five years, while tying US military aid to progress against extremists.

The package provides 7.5 billion dollars in humanitarian and economic aid over five years, recommends that level for another five years, while tying US military aid to progress against extremists. "This legislation marks an important step toward sustained economic and political co-operation with Pakistan," said Senator Richard Lugar, the top Republican on the Senate Foreign Relations Committee.

The House of Representatives passed its version of the legislation in mid-June, and the two chambers must now work out and approve a compromise bill before President Barack Obama can sign the measure into law. "Pakistan is facing a critical moment," said Democratic Senator John Kerry, the chairman of the Senate Foreign Relations Committee, after lawmakers agreed to approve it without dissent. Kerry crafted the bill with Lugar.

Supporters of the measure say they hope it will convince Pakistanis who are deeply skeptical of US support and goals that Washington stands with them against Islamists over the long haul and has their best interests at heart. "Today the Senate has made a clear bipartisan commitment to replace an atmosphere of mutual distrust and lack of accountability with a broad-based, durable commitment to Pakistan and its people," said Kerry.

The measure separates civilian aid aimed at boosting education, democratic governance, and sustainable economic growth for Pakistan's 170 million people from military assistance, which would be approved on a year-to-year basis. It ties military aid to certification that Pakistan security forces are doing their utmost against al Qaeda and similar groups, and requires Pakistan to stop the Taliban from using Pakistan's territory as a base.


(AFP)

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Friday June 26, 2009

ISLAMABAD: Federal Bureau of Statistics (FBS) has revealed that fruit and vegetable exports for the 11-month period between July 2008-May 2009 increased to 6.55 percent and 26.6 percent respectively, compared with the corresponding period of 2007/08.

Fruit exports increased in both volume and value terms, up to 435,198 tonnes in 2008/09 from 384,384 tonnes, with value increasing to US$143m from US$134m last year, according to the FBS.

Meanwhile, vegetable exports totalled 343,198 tonnes through the July 2008-May 2009 period at a value of US$67m, up from the 211,458 tonnes sold at US$53m during the previous campaign.

Additionally, the country's pulse exports jumped 82.9 per cent through the 11-month period, with 3,807 tonnes shipped at a value of US$3.4bn.


(Aaj TV)

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Friday June 26, 2009

LONDON: European stock exchanges closed in negative territory on Thursday, dragged down by data showing that more US workers applied for jobless benefits last week than had been expected.

The London FTSE 100 index fell 0.64 percent to finish at 4,252.57 while in Paris the CAC 4O dropped 0.68 percent to close at 3,163.10. The Frankfurt Dax lost 0.73 percent to finish at 4,800.56 points.

Elsewhere in Europe there were declines of 1.51 percent on the Swiss Market Index, 0.52 percent in Milan, 0.2 percent in Amsterdam and 0.03 percent in Brussels. Share prices in Madrid rose 0.52 percent on the day.

On Wall Street stocks swung higher Thursday as investors responded to a small upward revision in US economic output.

But the uptick in new US jobless claims kept trading cautious.

The Dow Jones Industrial Average at mid-day was up 0.53 percent at 8,344.15 while the Nasdaq had gained 1.46 percent to reach 1,818.49.

Market action came after the government reported that the US economy contracted at a 5.5 percent pace in the first quarter, not as bad as the previous estimate of a 5.7 percent drop.

Analysts said the report was consistent with other signals suggesting the worst slump in decades would soon be over.

"All the incoming data suggest that economic activity contracted at a much slower rate in the second quarter -- 2.5 to 3.0 percent -- and that the trough of this cycle is likely to occur sometime in August or September," said Nariman Behravesh at IHS Global Insight.

Behravesh said he "now expects the economy to be more or less flat in the third quarter and grow around 1.0 percent in the fourth quarter."

But the positive tone was soured by a report that new claims for US unemployment benefits climbed for the second consecutive week last week.

Initial claims for unemployment insurance benefits rose to a seasonally adjusted 627,000 in the week ended June 20 from an upwardly revised 612,000 claims in the prior week, the Labor Department said.

Most analysts had expected new claims of 600,000.

"The prevailing message remains that the labor market is weak and that's not a great portent for consumer spending or the housing recovery," said Patrick O'Hare of Briefing.com.

In London British Airways edged up 0.07 percent to 345 pence. The company said 800 employees had agreed to work for free while 7,000 would take a pay cut in order to help the carrier cut its losses.

In Paris trading was described as volatile, with Wednesday's gains reversed.

Oil group Total weighed heavily on the market, falling 1.19 percent to 38.04 euros on rumours that it might have to downgrade its financial targets.

Credit Agricole bank shed 3.90 percent to close at 9.14 euros after two brokerages lowered their profit predictions for the lender.

In Frankfurt chemical group BASF gave up 2.46 percent to end the session at 28.17 euros after announcing the closure of a plant in Germany in the face of weak demand.

Auto maker Volkswagen lost 3.19 percent to finish at 242.50 euros. Press reports said VW could form a cooperation alliance with Suzuki of Japan, possibly taking a 10 percent stake.

In Asia Thursday, Japanese shares jumped 2.15 percent, boosted by gains on other Asian markets and a weak yen, which is good for exporters. Hong Kong stocks soared 2.14 percent.



(AFP)

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Friday June 26, 2009

TOKYO: The dollar lost ground against the yen and the euro in Asian trade on Friday on expectations that US interest rates will remain low for some time, dealers said.

The dollar was changing hands at 95.68 yen in Tokyo morning trade, down from 95.95 yen in New York late Thursday. The euro rose to 1.4033 dollars from 1.3986 and to 134.32 yen from 134.26.

Lower US bond yields reduced demand for the greenback, dealers said. Investors tend to favour currencies offering higher returns. "The dollar faced selling, reflecting drops in long-term interest rates," said Yuji Saito, forex head at Societe Generale.

The market was still digesting Wednesday's decision by the US Federal Reserve to leave its stimulative monetary policy unchanged; giving no sign that it was preparing to scale back its pump-priming measures.

Gains on global stock markets also encouraged investors to take more risk, dampening demand for the safe-haven dollar, dealers said.

The market is now waiting for the release next week of key US jobs data, dealers said. "We want to watch if funds will be flowing from the safe-haven dollar and yen into riskier currencies next week" on the back of improving investor confidence, Saito said.

Meanwhile data showed the US economy contracted at a 5.5 percent pace in the first quarter, not as bad as the previous estimate of a 5.7 percent drop.

Analysts said this was consistent with other signals that the worst slump in decades may soon be over.

(AFP)

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Friday June 26, 2009

SINGAPORE: Oil extended gains above 70 dollars a barrel in Asian trade Friday as attacks on pipelines in crude producer Nigeria escalated and the US dollar wobbled from a recent rally, analysts said.

In morning trade, New York's main futures contract, light sweet crude for delivery in August, climbed 24 cents to 70.47 dollars a barrel.

Brent North Sea crude for August was up 35 cents to 70.13.

Nigerian rebels on Thursday said they carried out a pre-dawn attack against Royal Dutch Shell facilities in a warning to Russia not to invest in the country's oil and gas industry.

"The news from Nigeria (about) more attacks on oil facilities and the fact that two refineries are now shut down are supporting the market," said Andy Lipow, president at Lipow Oil Associates.

Other analysts said oil prices also had support from a weaker US dollar, which rallied briefly after a US central bank announcement Wednesday that it will maintain its monetary policy and keep interest rates at near zero.

The Fed's action helped lift the stock market and encouraged riskier market bets, which staunched the dollar rally.

A weaker dollar makes dollar-priced oil cheaper to holders of stronger currencies, encouraging demand and leading to higher prices.

Singapore's DBS Bank said however that governments would not like to see the US dollar collapse because of its influence on international trade.

"As far as Asian policymakers are concerned, shifting the economy's reliance towards domestic demand away from exports is not a structural change that can be achieved overnight," it said in a research note.

"Hence, they have been reluctant to let the US dollar fall below the post-crisis consolidative ranges against their currencies."

Industrialised countries also feel it is not the right time for the dollar to further depreciate, DBS said.

Many monetary policymakers "believe that the market has swung from excessive pessimism to excessive optimism," the bank said.

"A US dollar crisis could lead the green shoots (of economic recovery) to turn to brown weeds if it results in an unabated rises in both government bond yields and oil and commodity prices," it said.


(AFP)

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Friday June 26, 2009

ISLAMABAD: Pakistan Refinery Limited (PRL) and National Refinery Limited (NRL) have curtailed jet fuel supply to Shell Oil Marketing Company that may result in disturbance of flights at Karachi airport due to fuel shortage. Sources revealed to Business Recorder on Thursday that Shell had written a letter to the Petroleum Ministry, saying that the PRL and NRL were not supplying enough JP-1 fuel to maintain critical stocks necessary to sustain the air traffic.

The sources said Shell warned that its jet fuel stocks had dropped due to curtailed jet fuel supply by the PRL and NRL, and asked Petroleum Ministry to make alternative arrangements for jet fuel supply for airlines as fuel shortage might disturb flight schedule at Karachi airport. Responding to a letter addressed by Shell, the sources said, the Petroleum Ministry had written letters to the Managing Directors of the PRL and NRL, asking them to enhance the fuel supply to Shell in an effort to maintain fuel stocks for airlines.

The Sources were of the view that the PRL and NRL had reduced jet fuel supply to Shell due to lower production as a result of the financial crunch. Owing to circular debt problems, oil marketing companies (OMCs) and oil refineries are facing problems in continuing to supply fuel in the country. Power sector is a big defaulter and the main reason behind rising circular debt. The state run Pakistan State Oil (PSO) is a major fuel supplier that captures 70 percent of the market share and its dues against different clients have exceeded Rs 84 billion.

The PSO is facing a severe liquidity problem and is unable to open the letter of credits (LCs) for import of oil to meet the country's requirements. The Finance Ministry has recently issued Rs 24 billion paper guarantees to Pakistan Electric Power Company (Pepco) to settle the circular debt in oil and power sectors. However, analysts have termed the exercise of issuing paper guarantees as paper work that would provide no relief to the cash starved PSO and oil refineries.

Under the arrangement, the Pepco will divide Rs 24 billion paper guarantees into three parts, making book transfers to the electricity producers, including Hubco and Kapco. The Pepco would transfer some of the amount to the KESC and the PSO. In return, the Hubco, Kapco and the KESC would then reduce some of the debts on the books of the PSO and the KESC. Analysts point out that during the exercise, there would be no cash flow and ultimate beneficiary would be the government as it would receive dividends from the PPL and OGDCL at the end of the exercise.


(BRecorder)

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