Noting the dollar's recent slide against the euro, UK
pound, and yen, the IMF said an unrestrained drop could have serious
consequences at home and abroad. The IMF report said the dollar has been
affected by the mushrooming US current account and budget deficits.
"This trend (of deficits) is likely to continue to put pressure on
the US dollar, particularly because the current account deficit
increasingly reflects low saving rather than high investment.
"Although the dollar's adjustment could occur
gradually over an extendedperiod, the possible global risks of a
disorderly exchange rate adjustment, especially to financial markets,
cannot be ignored," the IMF said. "Episodes of rapid dollar
adjustments failed to inflict significant damage in the past, but with US
net external debt at record levels, an abrupt weakening of investor
sentiments vis-a-vis the dollar could possibly lead to adverse
consequences both domestically and abroad."
GOLD HITS 14-YEAR HIGH ABOVE $420
Gold started the first week of 2004 as it ended 2003
— charging to its highest since February 1990 as the dollar crumbled
against the euro and the yen and speculative funds maintained their
appetite for precious metals. Spot gold was at $420.75/ 421.45 an ounce at
1447 GMT, well up from $416.25/416.75 at European opening and what had
been a long-standing objective at $417.70. "The precious metals are
all off to the races — they are all up on the US opening," analyst
Kamal Naqvi of Barclays Capital said. New York futures markets re-opened
for the first time since December 31 on Monday, and all the precious
metals leapt higher. Silver jumped to its highest since April 1998, while
platinum rose some $20.
Bullion peaked at $422.20, and analysts said they
expected the metal to notch up further gains given voracious fund
purchasing, the trends on foreign exchanges and gold's close inverse
relationship with the dollar. Analysts said gold could touch $450, the
highest in 16 years, because of dollar weakness, fears of fresh attacks on
the United States and persistent violence in Iraq.
The dollar fell to a three-year low against the yen,
slipping below 106.50 as broad selling took it through key technical
support. The dollar was under pressure as comments by Federal Reserve
governor Ben Bernanke reinforced a view that US interest rates will stay
low for some time. The dollar traded at a low of 106.48 yen, while against
the euro it had dropped to $1.2695 on persistent worries about a widening
US current account deficit. "With analysts predicting a test of $1.30
in the euro by the end of the month further gains in gold seem
likely," James Moore of TheBullionDesk.com said.
CHINA MOBILES OUTSTRIP LANDLINES
China now has more mobile phones than it has landlines,
new figures show. According to the data from the Ministry of Information
Industry, subscriber numbers were up by more than 30% in 2003 to 269
million. Over the same period, the number of fixed-line phones rose to 263
million in a population of 1.3 billion people. The rapid growth mirrors
the mobile's explosive growth in Europe in the 1990s — although there
landlines were already much more common. Growth in China has slowed
sharply from the 60% annual subscriber expansion seen in 2002, but
analysts say the size of the urban market still offers room for solid
growth in years to come.
DOLLAR PAUSES AFTER RECENT SLIDE
The US dollar edged back on Jan 7 as investors took
stock of the record lows it has hit in recent days. Traders said the
dollar was plagued by concerns the US will no longer be able to finance a
huge trade gap if foreign investors tire of low interest rates. The dollar
was up 0.1% on the yen, but still trading around three-year lows, at
106.14 yen. In New York, the euro fell to $1.2637 after topping $1.28 for
the first time on Jan 6. The pound fell to $1.8162. But traders said the
pause was little more than a temporary respite for investors to lock in
profits from their backing of the greenback's slide. With the US
government apparently content to let the dollar slide, they said, the
decline was far from over.
EU BUDGET DEAL 'MAY BE ILLEGAL'
Suspending EU budget rules last year in order to avoid
punishing France and Germany may have been illegal, European Commission
lawyers have said. Pedro Solbes, the commissioner for economic and
monetary affairs, has hinted he is in favour of legal action to overturn
the decision.Taking the case to the Court of Justice could be "a
useful option," he said. Last year, the debate split the EU's
executive arm and the row is set be rekindled at a meeting next week.
Under the Growth and Stability Pact, members of the
eurozone are not supposed to run up budget deficits of more than 3% of
gross domestic product (GDP). France and Germany, battered by rising
unemployment and slowing economic growth, had bust out of those limits
arguing that capping spending would hamper a recovery.
NASDAQ'S SOARING START FOR 2004
The technology-heavy stock index which chronicled the
hi-tech boom and bust of the past decade has leapt on the first full-scale
trading day of 2004. The Nasdaq Composite index climbed more than 2% to a
two-year high comfortably above 2,000. The Dow Jones index of bluechip
stocks, meanwhile, added 1.3% or 134 points. Investors took heart from a
speech by Federal Reserve Governor Ben Bernanke, who promised low interest
rates for the foreseeable future. Strong sales of chips added to the
bullish mood surrounding tech stocks, as did advice from software maker
Siebel that its profits for the last quarter of 2003 would be 50% higher
than expected. The euphoria on Wall Street had earlier ensured gains for
major markets in Europe, despite yet another slide in the value of the
dollar against both the euro and the pound.
AILING LEVI CLOSES LAST US PLANT
Iconic clothing firm Levi Strauss has finally departed
the US, with the closure of its last American plants. The closing of two
San Antonio factories marks the end of 150 years of making jeans and other
items in the US. The decision to leave the US, taken last year, is part of
Levi's drastic attempt to slash costs in the face of slumping demand for
its core products.
GOLD FIRM ADMITS SMUGGLING CHARGE
One of the biggest gold refiners in the US is to plead
guilty to participating in a $4.5m (£2.5m) smuggling operation.Metalor
USA Refining, a subsidiary of Swiss Metalor, faces a $9m fine after
admitting one charge of engaging in illegal financial transations. The
case followed tip-offs from Metalor staff, who noticed couriers
repackaging gold in shampoo bottles. Money-launderers were purchasing US
gold with drug money, and then smuggling the metal to South America. The
smuggled gold was then reworked and sent back to the US, where it was
refined and shipped back to South America, in some cases even collecting
US JUDGE APPROVES ENRON PLEA DEAL
A US judge has approved a plea bargain from the wife of
the former chief financial officer of collapsed energy firm Enron. The
development helps pave the way for prosecutors to persuade Andrew Fastow
himself to plead guilty and help their investigation. Lea Fastow would
spend five months in jail under the proposed deal.
VIETNAM PLANS GOLD BUYING SPREE
Vietnam's central bank has given the go-ahead for the
country to import up to 10 tonnes of extra gold in the first quarter of
2004. The diving dollar pushed gold prices to a 15-year high on world
markets two days ago, hurting business and savers in Vietnam. Gold is used
as hard currency for big business deals in Vietnam, which has a thriving
black market for the metal.
UK INTEREST RATES REMAIN ON HOLD
The Bank of England has decided to keep UK interest
rates on hold last week. As expected, the Bank's monetary policy committee
voted to keep the base rate at 3.75% for the second month in a row. There
has now been no change since the quarter percentage point increase in
November, itself the first upward move for nearly four years.
EUROZONE RATES REMAIN UNCHANGED
Eurozone interest rates have been kept at 2% by the
European Central Bank. The ECB's decision not to change interest rates was
widely expected by economists, though some believe a cut could help to
stem the euro's rise. The euro's rise to record levels against the dollar
prompted Germany's Economics Minister Wolfgang Clement to call for a rate
cut on last week.
NIGERIA BANS TEXTILE IMPORTS
Nigerian government officials say they have decided to
ban imports of textiles, pork, pork products, mutton, apples, flowers and
some other items. They say the action is being taken to protect Nigerian
producers from competition. They say that there are provisions in World
Trade Organisation rules which allow them to take such action for a period
of up to five years. The BBC's economics correspondent says that the
relevant WTO provisions also require countries taking such action first to
have an investigation and give an opportunity for interested parties to
express their views. It was not immediately clear whether such an exercise
had been conducted.
STRONG MOBILE DEMAND LIFTS NOKIA
Shares in Nokia, the world's largest mobile phone
maker, have jumped after the firm delighted investors with an upbeat
trading statement. The Finnish company said both its sales and profits for
the fourth quarter would be "significantly higher" than it had
previously estimated. Thanks to strong demand the firm said mobile phone
sales had increased by 4% to 7bn euros ($8.9bn; £4.9bn).
CLAIMANTS SEEK 20% OF SA FARMLAND
South Africans who lost land during the apartheid era
are claiming back 20% of the country's commercial farmland, a land claims
official has said. In some provinces, that figure may rise to as much as
50%, according to chief lands claim commissioner Tozi Gwanya. Where owners
refuse to sell, a new law will allow the government to move in.
US TO OVERHAUL IMMIGRATION LAW
George W. Bush has called for a major overhaul of US
law to give legal status to millions of illegal workers. The plan would
allow some of America's undocumented immigrants — at least eight
million, 60% Mexican — to work legally in the US for a fixed period.Many
see the plan as a bid by President Bush for the Hispanic vote in this
year's presidential election.
UNION FEARS NISSAN MOVE TO FRANCE
Trade union bosses representing workers at Nissan car
plant in Sunderland, are seeking talks over remarks made by the Company
president Carlos Ghosn. At the Detroit Auto show he warned the Wearside
plant could lose production of one of its most important cars if the UK
continues to stay outside the euro. The plant makes the mid-sized Almera
model, but Nissan says it may make the forthcoming replacement in France.
RECORD UK CAR SALES DURING 2003
Motorists bought a record number of new cars last year,
industry figures show. A total of 2.58 million new vehicles left the
forecourts in 2003, according to the UK wide study by the Society of Motor
Manufacturers and Traders (SMMT). The record figure was helped by an end
of year sales surge, with 155,000 new cars registered in December, a 7%
increase on the same month in 2002.Led by Ford, Vauxhall and Renault,
eight foreign makers topped the sales list, with MG Rover in ninth place.
SCHWARZENEGGER'S 'NO TAX' PROMISE
Arnold Schwarzenegger, California's governor, has sworn
he will not use new taxes to sort out the state's finances. In his annual
"state of the State" address, Mr Schwarzenegger said that if
legislators did not back his plans, the state would run out of money. He
insisted there was not a "budget crisis" but a "spending
crisis". But his Democrat critics said the hole in the state's books
— which some estimates put at $12-$14bn — could not be bridged solely
by slashing spending.
BUSINESS PROFIT AT FOUR-YEAR HIGH
The profitability of UK companies has reached its
highest level in four years, according to official figures. The net rate
of return by non-financial firms in the third quarter of 2003 was 12.6%,
compared to 12% in the second. This is the largest rate since 13% was
achieved in the fourth quarter of 1999, the Office for National Statistics
said in its latest report. The new figure for the manufacturing sector was
7.4%, but the service sector managed a return of 14.7%.