FIs want depreciation
facility restored
They pay higher taxes for
lower real income
Staff Correspondent
Financial institutions are in deep trouble following the withdrawal of depreciation of assets leased by them in the current fiscal year forcing them to pay higher tax for lower real income.
The companies enjoyed the facility for the last 22 years but the government dropped it in 2007-08 budget.
‘We are paying higher taxes and have less money to invest due to the government decision’, said Anis A Khan, chairman of Bangladesh Leasing and Finance Companies Association at a press conference on Thursday.
The companies which own the leased assets will not be allowed to charge depreciation for the assets from this fiscal year and thus have to pay more taxes as their financial statements show higher income.
The depreciation is deducted from the total income of a company but if the company is not allowed to charge depreciation, its financial statement shows higher net income and it has to pay more taxes, explained Anis.
The companies, especially the smaller ones, are facing serious cash crisis due to the new regulation, he said.
Most of the countries, including India and Pakistan, allow leasing companies to charge depreciation and help the sector flourish, the chairman noted.
‘Rate of return from investment is very important for a business but the recent tax directive has reduced the sector’s return sharply’, he said.
He urged the government to restore the facility in the upcoming budget and help the sector grow smoothly.
The banks have less cost of fund and wider scope of fee-based income than that of the financial institutions, but they pay corporate taxes at a same rate of 45 per cent, he said. ‘It will be more practical if the government reduces the tax rate on financial institutions.’
The financial institutions can offer home loan at a lower interest rate if the government reduces tax on income from housing finance to 30 per cent, he said.
‘It has two benefits. On the one hand the housing sector will grow rapidly and on the other dwelling problems for the middle class will be reduced,’ he pointed out.
After getting job a person can take a home loan with a lower interest rate and repay it in the next 25 years and the FIs can make such offer if they get government patronisation, he hoped.
Individual clients of the merchant banking wings of the financial institutions are paying higher taxes as the NBR is yet to give a simple clarification of the related law, he said.
A company pays 15 per cent tax on dividend income whereas an individual pays 10 per cent tax on such income, according to the income tax laws.
All the dividend incomes are gathered in a single merchant bank account and individuals and corporate bodies are both beneficiaries, said Anis.
As that single account is corporate in nature, the merchant bank has to pay 15 per cent tax on dividend income even though most of the beneficiaries are individuals, he pointed out.
‘The NBR chairman assured us in a meeting in February that he would look into the issue. But the tax authorities are yet to issue any circular clarifying the mismatch,’ the chairman said.
Mafizuddin Sarker, vice-president of the BLFCA, and HM Ziaul Hoque Khan, general manager of IDLC, were present at the press briefing.
20,000 more tonnes hilsa to be
produced in Barisal belt
United News of Bangladesh . Bagerhat
Some 20,000 tonnes more hilsa will be produced in Barisal belt this season as the government had imposed ban on fishing along 290km of three coastal sanctuaries in the region from March 1 to April 30.
The fishermen refrained themselves from fishing during the period following the ban imposed on fishing for growth and breeding of the fish.
The government imposed restriction on fishing along 100km in Meghna river from Shatnal of Chandpur to Alexander of Laxmipur district, 100km in Tetulia river from Bhaduria of Bhola to Char Rustam of Patuakhali district, and 90km of Meghna river from Sahabazpur Channel to Charpiyal in Bhola district.
In case of violation of the order, the government had announced punishment of six months imprisonment and Tk 5,000 as fine for the violators.
Barisal Divisional Fisheries Department informed that 2.80 lakh tonnes of hilsa was produced in the Bay of Bengal under the belt in 2006-07.
The hilsa production will go up to 3 lakh tonnes this season, they hoped.
It is mention worthy that there are 4.50 lakh people involved in hilsa fishing covering 145 upazilas in 40 districts across the country.
Tele-density may go up to
80pc by 2012: WB
Bangladesh Sangbad Sangstha . Dhaka
An ICT specialist of World Bank on Thursday said the tele-density is expected to go up to 80 per cent of the population in Bangladesh by 2012.
The specialist of the Global ICT Department of the WB, Tenzin Dolma Norbhu, said this while presenting a keynote paper on ‘Core policy issues and global best practice’ at a seminar on
‘Telecom and ICT industry in Bangladesh: past, present and future’ organised by Bangladesh Enterprise Institute in its conference room in the capital.
Dolma Norbhu said the telecom sector contributed over one per cent to the gross domestic product in 2007.
She said six South Asian countries out of eight have consolidated their ICT sectors under a single ministry. Many organisations like the Planning Commission and the Prime
Minister’s Office in Bangladesh have been brought under e-governance, she added.
President of the BEI Farook Sobhan gave a welcome speech while chief executive officer of the Grameenphone Ltd, one of the leading mobile operators, Anders Jensen presented another keynote paper on the ‘Telecom and ICT industry in Bangladesh’.
Secretary of the ministry of post and telecommunications Iqbal Mahmood, chairman of Bangladesh Telecommunications Regulatory Reforms Commission Major General (retd) Manzurul Alam, executive chairman of the Board of Investment Kamal Uddin Ahmed, CEO of Banglalink Ltd Rashid Khan, CEO of Pacific Bangladesh Telecom Michael Seymour, managing director and Citygroup country officer of Citi Bank NA Mamun Rashid and senior consultant of BTRC Aneek R Haque spoke as designated discussants at the seminar.
Chief editor of United News of Bangladesh Enayetullah Khan, managing director of Teletalk Bangladesh Mujibur Rahman and representatives from various mobile operators and IT firms also attended the seminar.
Farook Sobhan said the potential ICT sector has been playing a significant role in development of both the trade and investment.
Reforms in the ICT sector are a must for its development. Tax should be reduced. Integration of the ICT and the telecomm sector is required, he added.
NBR chairman stresses local
investment-oriented budget
Staff Correspondent . Chittagong
The National Board of Revenue chairman, Abdul Mazid, on Thursday stressed the need for local investment and production oriented national budget for economic development of the country.
‘We will have to go for local investment and production oriented budget shunning the long practice of import and foreign investment based budget,’ he said while addressing a pre-budget discussion in the port city.
With Chittagong Chamber of Commerce and Industry president Saifuzzaman Chowdhury in the chair, CCCI senior vice-chairman MA Latif, vice-chairman Mahbub Alam, and former president Engineer Ali Ahmed, Bangladesh Steel Re-rolling Mill chairman Ali Hossain, editor of Dainik Azadi, MA Malek, managing editor of Dainik Purbakone, Jashimuddin Chowdhury, and FBCCI director Amirul Hoque also took part in the pre-budget discussion meeting in the CCCI auditorium.
The CCCI president urged the NBR chairman to propose measures for withdrawing tax on import of machineries for small and medium enterprises in the next budget.
He also demanded slashing tax on primary raw materials of small and medium enterprises to 5 per cent from the existing 10 per cent alongside cutting tax on secondary raw materials to 12 per cent from the existing 15 per cent.
Saifuzzaman alleged that the importers were incurring huge losses due to unfair practices of the pre-shipment inspection companies which had been contributing significantly to the price spiral of goods.
He demanded of the government to scrap PSI system and install scanner machine at the seaport alongside introducing automation system in taxation. It would save $150 million of the nation yearly, he added.
The CCCI president also demanded financial assistance to encourage third party export adding that it would be instrumental for boosting up export of cement, ceramic, melamine, CI sheet, plastic and leather goods.
He further demanded imposing of ban on import of powdered milk and baby foods from third country, and curtailing of value added tax on gross sale at the hotels and restaurants to 3 per cent from the 15 per cent.
The CCCI president also demanded tax holiday for eight years to promote rapid industrialisation in the country.
India halts trade in staple
foods to combat inflation
Agence France-Presse . New Delhi
India’s government on Thursday halted trading in futures contracts for key staple foods and for rubber as it battled to avoid an election drubbing due to high inflation.
The government suspended futures trade in basic foods such as chickpeas, soybean oil and potatoes for four months, saying the move was aimed at stopping price rises driven by speculators. It also halted futures trade in rubber.
The ruling Congress-led coalition said more efforts were also underway to fight inflation in Asia’s third-largest economy, as cement producers Thursday joined steelmakers in pledging price cuts.
‘The government is not helpless and it has means to ensure prices are brought down,’ junior industry minister Ashwani Kumar said in New Delhi.
‘More measures — both administrative and fiscal — are in the offing to control inflation.’
The promise by cement-makers to cut prices came a day after steelmakers said they would reduce charges following a plea by the government.
‘In the course of the coming few days, a significant reduction in cement prices can be expected,’ Kumar said after the government vowed further tough action against the sector besides an export ban and allowing duty-free cement imports.
The steelmakers have announced cuts in prices by up to 4,000 rupees ($96) a tonne for three months.
The Congress party is desperate to wrestle down inflation to avert a voter backlash in general elections due by next May.
It also faces a host of state elections in between, including in southern Karnataka state, which goes to the polls this weekend.
The election is seen as a bellwether of popular discontent over inflation running at a 42-month high of 7.57 per cent despite aggressive monetary tightening, which has pushed interest rates to six-year highs.
India’s hundreds of millions of poor — whose electoral support is vital — have been hit hardest by the surge in inflation, which has more than doubled since last November.
The government had already suspended futures trading in other basic foods such as rice and wheat, which are staples in the country of 1.1 million people.
Futures contracts involve betting on future price movements of such items as commodities, bonds, currencies and shares.
BRAC Bank to acquire 51pc
share of GSP Finance
Business Desk
The board of directors of the BRAC Bank Limited recently has decided in principle (subject to the necessary regulatory approval) to acquire 19,46,500 numbers of new shares of the GSP Finance.
A memorandum of understanding was signed between GSP Finance and BRAC Bank to this effect on Thursday, said a press release.
GSP Finance has proposed to sell the shares to BRAC Bank. The total number of shares of the GSP Finance after issuing of 19,46,500 new shares will be 38,16,500 numbers of shares.
The BRAC Bank agreed in principle to acquire the
whole issue–19,46,500 numbers of shares–which will be the 51 per cent of the post issue paid up share capital of the company.
JICA VP arrives tomorrow
Bangladesh Sangbad Sangstha . Dhaka
Masafumi Kuroki, vice-president of Japan International Cooperation Agency, arrives in Dhaka tomorrow (Saturday) on a five-day visit to Bangladesh.
The purpose of his
visit is to exchange information on JICA-Japan Bank for International Cooperation merging process, and also to observe the impact and development effects of JICA projects in Bangladesh.
Masafumi Kuroki would pay a courtesy call on finance and planning adviser AB Mirza Azizul Islam.
He will have discussions on JICA programmes and projects with the officials of concerned ministries and departments, and will also visit some JICA-assisted projects.
HSBC celebrates 100000th client
Business Desk
The Hongkong and Shanghai Banking Corporation Ltd recently celebrated its 1,00,000th customer in Bangladesh.
To celebrate the one lakh customer milestone, the HSBC has launched a special promotion, offering a 10 per cent interest rate for seven months on new money deposits of Tk 1 lakh, said a press release. This promotional campaign will run for the next two months.
Established in Bangladesh in 1996, the HSBC has grown into one of the country’s leading financial institutions.
HSBC Bangladesh chief executive officer Steve Banner said, ‘We are proud to be growing our business in Bangladesh and remain committed to delivering the best possible service to each and every one of our customers.’
Premier Leasing declares
12.50pc stock dividend
Business Desk
The Premier Leasing and Finance Limited held its 6th annual general meeting in the Dhaka city recently.
In the meeting, the company declared 12.50 per cent stock dividend for the year 2007, said a press release.
Mizanur Rahman Shelley, chairman of the board of directors of the company, presided over the AGM which was attended by the company’s vice-chairman ASM Feroz Alam, and directors Abdul Mannan, SM Abdul Mannan, AZM Akramul Haq, Khairul Anam, A SM Faridul Alam, alternate director M Tabibul Huq and M Morshed, independent director AKM Shamsul Alam and managing director Kazi Emdadul Hoque. Sponsors of the company Juned Ahmed and Nikhil Kumar Saha, consultant RA Howlader and secretary to the board Subash Chandra Moulick, among others, were also present in the meeting.
Eurozone economic growth shows
signs of slipping
Agence France-Presse . Athens
Signs the eurozone economy was slowing down were unlikely to lead to lower interest rates as governors of the European Central Bank gathered in Athens Thursday, analysts said.
‘For now, the ECB is firmly on hold,’ Bank of America economist Holger Schmieding said in a summary of market sentiment.
The ECB governing council met in Athens at a twice-annual event organised in a eurozone capital, hosted this time by Greek central bank governor Nicholas Garganas, who is to step down when his term expires in June.
ECB governors have kept the main lending rate at 4.0 per cent since June last year even as the US Federal Reserve slashed its rate to 2.0 per cent and the Bank of England gradually lowered the cost of borrowing in Britain.
BoE policymakers were expected to keep rates steady at 5.0 per cent Thursday following their own meeting in London on Thursday.
The contrasting central bank decisions pushed the euro to record highs against the dollar and pound last month, making eurozone exports more expensive on global markets and sparking criticism of the ECB in some quarters.
But the bank’s governors focus on inflation, which hit a record 3.6 per cent in March and was expected to remain well above the ECB’s target of just below 2.0 per cent for months to come.
UniCredit analysts forecast that a dip to 3.3 per cent in April ‘will provide only short-term relief and inflation will jump back to 3.5 per cent in May.’
ECB president Jean-Claude Trichet has warned that spikes in energy and food prices mean households curb spending, so undermining the consumption many hoped would pick up amid falling unemployment and wage increases in countries such as Germany, the biggest European economy.
On Wednesday European Union data showed that eurozone retail trade fell by 1.6 per cent in March on an annual basis.
‘The latest data confirm that the domestic household sector is so far doing nothing to make up for slowing external demand,’ Capital Economics economist Jennifer McKeown said.
German industrial orders also posted their fourth straight drop in March, an indication that the export-oriented economic engine was likely to start losing steam.
‘Evidence of a moderate slowdown in euro-zone economic activity has mounted in the past month, with even those survey indicators that were previously most optimistic taking a turn for the worse,’ Capital Economics added Thursday in a research note.
The European Commission’s economic indicator ‘now points to a slowdown in eurozone annual growth to around 1.5 per cent,’ it said.
Schmieding noted that ‘the strong euro, the soft US economy and the global uncertainties weighing on domestic business investment are taking their toll.’
Many analysts expected that once inflation came off the boil and compelling evidence of an economic slowdown appeared, the ECB would begin to cut interest rates.
Aurelio Maccario at UniCredit Markets said his bank was confident that ‘the conditions for entering an accommodating cycle will emerge, and that at the end of the year the central bank will start cutting rates.’
On such views, and hopes that the US economy was turning the corner, the dollar has begun a recovery against the euro, with the single currency trading early Thursday at 1.5342 dollars — well below its record above 1.60 dollars set last month.
But such a trend, along with a possible rebound in global financial markets and the US economy, ‘would eventually make the need for lower ECB rates obsolete,’ Schmieding commented.
Argentina farmers back on
strike after talks break
Agence France-Presse . Buenos Aires
Thousands of Argentine farmers resumed a crippling strike Wednesday after one month of talks with the government to roll back a stiff tax hike on soybean exports broke down, a union leader said.
Mario Llambias said the country’s four major farming groups would stop all cereal exports in the country for one week and block the country’s main roads again, although this time without stopping food supplies to major cities.
Angry over president Cristina Kirchner’s tax on soybeans — Argentina’s main export — farmers in March went on a three-week strike that emptied supermarket shelves of food in Buenos Aires and other main cities.
The strike presented Kirchner with her biggest test since she took over from her husband and predecessor Nestor Kirchner in December, and triggered a political crisis that cost economy minister Martin Lousteau his job.
A truce was called on April 2 to allow for negotiations that broke off Wednesday with no agreement. Before Llambias’s announcement, Kirchner’s chief of staff and top negotiator in the talks, Alberto Fernandez, warned farmers publicly: ‘if you go on strike, you’ll have to deal with the consequences.’
Fernandez said the government was ‘always open to dialogue, but will not tolerate the threat of a strike if they don’t get their way.’
The raising of export tariffs on soybean products from 33 to 44.1 per cent is challenged by farmers, who claim that along with income taxes, transport costs and the high cost of land, it will push many of out of business.
The confrontation has deepened divisions between Argentina’s upper and middle classes — including many well-off farmers — and the poor class, swollen by the country’s 2001 financial collapse, which supports Kirchner.
Brazil to create $20b
sovereign fund
Agence France-Presse . Brasilia
Brazil is to create a 20-billion-dollar sovereign fund to support Brazilian investment abroad and ‘absorb excess dollars in the market,’ economy minister Guido Mantega was quoted Wednesday in an interview with the Folha de Sao Paulo newspaper.
The fund may be operational by the end of June, Mantega said, adding that it would work through the government’s Brazilian Development Bank.
The decision comes as Brazil seeks to better use its foreign cash reserves, which now amount to nearly 200 billion dollars on the back of a booming national economy and strengthening national currency against the dollar.
Mantega stressed, however, that the new sovereign wealth fund would not derive its money from the reserves.
Brazil’s planning and budget minister, Paulo Bernardo, on Tuesday confirmed the drafting of the fund was complete, and it would soon start work helping Brazilian business abroad.
BoK keeps rate unchanged for
9 months to curb inflation
Agence France-Presse . Seoul
South Korea’s central bank on Thursday left its key interest unchanged for the ninth consecutive month to curb inflation, even though it warned of a further slowdown in growth this year.
The Bank of Korea, which left the rate for May at 5.0 per cent, has made the fight against inflation its priority despite calls for moves to boost the economy amid a looming recession in the United States.
The bank said it now expects growth in 2008 of 4.5 per cent or lower, down from its earlier forecast of 4.7 per cent and far below the new government’s target of six per cent.
‘Given the current situation, the economic growth rate is likely to be 4.5 per cent or lower,’ its governor Lee Seong-Tae told reporters.
‘The domestic economy is slowing down considerably in its pace of expansion,’ he said.
‘High prices of oil, food and raw materials and the slowing US economy are taking a toll on our economy.’
Lee also said inflation was expected to remain high ‘for a considerable time.’
Consumer prices year-on-year rose a higher than expected 4.1 per cent in April due to soaring oil and food prices, surpassing the bank’s target range of 2.5-3.5 per cent for a fifth straight month.
A weaker won against the dollar is also adding to inflationary pressure as it makes imports more expensive. The local currency has fallen more than eight per cent against the greenback so far this year.
The central bank last cut its key rate in November 2004, lowering it to 3.25 per cent. It left the rate at that level until September 2005, before raising it by 175 basis points between October 2005 and August 2007 to 5.0 per cent.
The bank said South Korea was facing not only downside risks to economic growth but upward pressures on inflation.
‘Rising prices of raw materials lead to inflation as current account deficits continue,’ the bank said in a statement. ‘The domestic economy is showing signs of a slowdown in its pace of expansion.’
Economist Shyn Yong-Sang of the Korea Institute of Finance said the bank is in a dilemma because of rising inflationary pressure and a slowing economy.
Until last month, there seemed to be some need to lower interest rates in consideration of a slower economy. But high oil prices, a weak won and ample liquidity were worse than expected, he said.
‘There is a growing possibility of stagflation, where prices rise amid a slow economy. The Bank of Korea is likely to remain in a dilemma, unable to raise or lower interest rates,’ Shyn said.
China to keep grain output above
500m tonnes in ’08
Agence France-Presse . Beijing
China has vowed to keep grain output above 500 million tonnes in 2008 as the world’s largest producer and consumer of rice struggles to cope with rising global grain prices, state media said Thursday.
‘We will strive to stabilise full-year grain output at more than 500 million tonnes,’ said agriculture minister Sun Zhengcai, according to the China Securities Journal.
In 2007, China produced more than 501.5 million tonnes of grain, almost level with the nation’s annual consumption of 510 million tonnes, official data showed.
Sun also pledged to strictly control the development of biofuels to protect the country’s grain supplies and arable land banks, according to the China Daily Thursday.
Biofuels, transformed from corn, wheat, soy beans and sugar cane, are accused by experts and international organisations of snatching food out of the mouths of the poor.
‘China will never develop biofuels at the cost of grain supplies or arable land,’ Sun was quoted by the report as saying.
His remarks came at a time when global rice prices rose to their highest level in 19 years and wheat prices to a 28-year peak, stoking fears that they might affect domestic prices and exacerbate already high inflation.
China’s inflation, mainly driven by surging food price, reached 8.0 per cent in the first quarter of the year. In February, it climbed to 8.7 per cent, the highest in nearly 12 years, before easing slightly to 8.3 per cent in March.
‘We must be highly alert to potential imported grain price rises and unusual changes in grain imports and exports,’ Sun said, according to the China Securities Journal.
The government scrapped tax rebates for grain exports late last year and levied taxes on grain exports in 2008 aimed at reining in galloping inflation and ensuring stable domestic food supplies.
Sun said the domestic agricultural products market was currently in balance due to output growth in recent years and large reserves, adding ‘rises of farm produce prices are ... reasonable and controllable’.
The central government promised at the beginning of the year to spend 562.5 billion yuan ($80.3b) in 2008 to support farmers, 130.7 billion yuan more than in 2007.
In March, it said it would earmark another 25.3 billion yuan to boost grain production in particular.
But analysts said even a stable grain output in China could do little to slow down global price surges as the country, which has to feed 1.3 billion people, was a net grain importer.
Toyota warns of first profit
drop in 9 yrs
Agence France-Presse . Tokyo
Toyota Motor Corp warned Thursday it expects the first drop in annual profits in nine years because of a weak US economy, a stronger yen and soaring raw material costs.
The gloomy forecast came as Japan’s largest automaker reported another record performance for the financial year to March on the back of brisk demand in fast-growing emerging economies. Toyota, on course to overtake Detroit giant General Motors as the world’s top selling automaker, posted a 4.5 per cent rise in annual net profit to 1.72 trillion yen ($16.4b).
It said operating profit increased by 1.4 per cent to 2.27 trillion yen as revenue climbed by 9.8 per cent to 26.29 trillion yen — both all-time highs and roughly in line with the company’s own forecasts.
Japanese automakers have enjoyed brisk profits in the US market, helped by firm demand for fuel-efficient cars and a weak yen.
But a credit crunch, the surging cost of steel and other raw materials, and a falling dollar are now weighing on their earnings prospects.
‘The business environment is extremely difficult,’ Toyota president Katsuaki Watanabe told a press conference.
The higher yen and raw material prices ‘will be major issues for us to tackle,’ he said.
‘We will cut waste and review our ways of doing business.’
Toyota forecast a 27.2 per cent plunge in net profit to 1.25 trillion yen in the current financial year to next March.
It sees a 29.5 per cent drop in annual operating earnings to 1.60 trillion yen this year and a 4.9 per cent fall in revenue to 25.0 trillion yen.
‘It’s going to be the first year-on-year decline in nine years which really suggests that even for Toyota the current situation is very, very tough,’ said Credit Suisse auto analyst Koji Endo.
‘The US market is slowing down and even Toyota seems to be facing a very tough time selling their light trucks. Raw material costs — especially steel, precious metals and plastics — are going up and that’s probably going to be very significant this year,’ said Endo.
Toyota said it had sold a record 8.91 million vehicles last year, up 4.6 per cent from the previous year, despite a drop of 3.7 per cent in Japan where a shrinking population is weighing on the market.
CORPORATE BRIEF
AB Bank teams up with
Pragati Insurance
Business Desk
The AB Bank Ltd and the Pragati Insurance Ltd signed an agreement on insurance coverage of lockers at the corporate head office of the bank in the Dhaka city on Wednesday.
Shamim A Chaudhury, deputy managing director of AB Bank, and ABM Mir Hossain, additional managing director of Pragati Insurance, signed the deal on behalf of their respective organisations, said a press release.
AB Bank president and managing director Kaiser A Chowdhury, and Pragati Insurance managing director AKM Rafiqul Islam was also present in the agreement signing ceremony.
Jamuna Bank holds training
course for officers
Business Desk
The 29-day foundation
training course for the probationary officers of the Jamuna Bank Limited was concluded at the Jamuna Bank Training Institute in the Dhaka city recently.
Mohammed Lakiotullah, managing director of the bank, was present at the closing ceremony as chief guest, said a press release. He distributed certificates to the participants and also gave away prizes to three participants who secured first, second and third position in the training course.
Shahedul Alam Khan, senior vice-president and head of human resources division and Mahbubul Huq Chowdhury, senior vice-president and head of Sonargaon Road branch of the bank, were also present in the function. Md Anwar Hossain, principal of the Jamuna Bank Training Institute moderated the ceremony.
Dollar mixed before European
rate decisions
Agence France-Presse . London
The dollar gained against the euro on Thursday but fell against sterling ahead of interest rate decisions from the European Central Bank and the Bank of England, dealers said.
In European trade, the euro fell to 1.5340 dollars from 1.5395 dollars in New York late on Wednesday.
The US unit slid to 103.92 yen from 104.66 yen while the British pound climbed to 1.9609 dollars from 1.9532 dollars.
Dealers also tracked soaring oil prices which had hit a record high 123.93 dollars on Wednesday.
Later Thursday, the European Central Bank was widely expected to leave eurozone borrowing costs unchanged, with all eyes looking ahead to the subsequent press conference amid inflation concerns, analysts said.
‘The ECB is expected to keep interest rates on hold at 4.0 percent today,’ said Commerzbank analyst Gavin Friend.
‘However, today’s statement of ECB president Trichet could prove a stumbling block for the euro,’ he said.
‘If he acknowledges increasing downside risks for the economy today, investor concerns could increase further, weighing on the euro.’
ECB governors, meeting in Athens this week at a twice-annual event organised in a eurozone capital, have kept the main lending rate at 4.0 percent since June last year.
In contrast, the US Federal Reserve has slashed its rate to 2.0 percent in a bid to boost the flagging American economy while the Bank of England has also gradually lowered British borrowing costs.
Higher interest rates are usually seen as positive for a currency because investors prefer assets which offer higher yields.
The BoE was to announce its latest interest rate decision at 1100 GMT on Thursday while the ECB announcement was due shortly afterwards at 1145 GMT.
The British central bank’s nine-member monetary policy committee was expected to keep rates steady at 5.0 percent following their meeting in London.
However, a recent run of weak data — on consumer confidence, house prices, industrial output and service sector activity — has boosted the chances of another cut following last month’s quarter-point reduction, analysts said.
‘Whilst weak activity data warrants a reduction in the bank rate, this is hampered by inflation concerns,’ said Steve Pearson, chief currency strategist at Bank of Scotland Treasury.
‘This is likely to leave the MPC split on its decision today but a narrow majority could still push a rate cut through.’
In London on Thursday, the euro changed hands at 1.5340 dollars against 1.5395 late on Wednesday, at 159.41 yen, 0.7827 pounds and 1.6189 Swiss francs.
The dollar stood at 103.92 yen and 1.0554 Swiss francs. The pound was at 1.9609 dollars.
On the London Bullion Market, the price of gold rose to 871.75 dollars per ounce from 868.25 dollars late on Wednesday.
Oil price holds near record highs
Agence France-Presse . London
Oil prices held near record levels Thursday after gains overnight to nearly 124 dollars as speculators dived into a market concerned about potential supply disruption, traders said.
New York’s main oil futures contract, light sweet crude for June delivery, eased three cents to 123.50 dollars a barrel. On Wednesday, New York crude had struck a record high 123.93 dollars.
London’s Brent crude contract hit a record high of 122.79 dollars in early trade Thursday before easing back to 122.40 dollars, up eight cents on Wednesday’s close.
Sucden analyst Michael Davies said Thursday that for investors, ‘risks still remain and given recent comments from Goldman Sachs ... anything is possible in the oil market at the moment.’
US investment bank Goldman Sachs this week forecast that prices could hit 200 dollars in the next two years. The bank had famously and correctly predicted three years ago that oil would break through 100 dollars — which it did in January.
Oil prices have crashed through records every day this week, jumping by about seven dollars in total.
‘Clearly the current spike in oil prices has been sharp and furious, and with little in the way of fresh impetus and lack of supporting (supply/demand) fundamentals a retracement must surely be on the cards,’ said Bank of Ireland analyst Paul Harris.
‘That said, in current conditions it is difficult to call exactly when the bearish (negative) elements will prevail. More importantly, the key issue is how far that pullback will be, with oil prices below 100 dollars a barrel at this stage a dim and distant memory,’ Harris added.
Some economists fear that surging oil prices could crimp US economic growth and Wall Street tumbled on Wednesday after the latest spike.
America is the world’s biggest oil importer but its economy has been pressured by a long-running housing market slump and a related credit squeeze.
Oil prices continued their gains Wednesday despite a weekly survey by the US government showing that the country’s crude stocks rose by 5.7 million barrels to 325.6 million barrels for the week ended May 2.
Analysts said that while the inventory report showed an unexpectedly large crude gain, many market participants zeroed in on drawdowns in distillates, which include diesel and heating oil, and which provided the momentum for a strong close.
Traders said a combination of forces have pushed prices higher, including market speculators and a decision by the Organization of the Petroleum Exporting Countries cartel not to hike output quotas.
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BIZLINE
Reverse repo
auction held
The Reverse Repo auction for commercial banks and financial institutions was held at the Bangladesh Bank on Wednesday, May 07, 2008. 1 bid of 1-day tenor amounting to Tk 28.00 crore was received and that bid was accepted. The rate of interest against the accepted bid was 6.50 per cent per annum, said a press release.
— New Age
Repo auction held
The Repo auction of Bangladesh Bank for commercial banks and financial institutions was held on Thursday. Three bids for 3-day tenor amounting to total of Tk 117 crore were received and those bids were accepted. On the other hand for liquidity support facility for primary dealers, 7 bids of 3-day tenor amounting to total of Tk 2311.50 crore were accepted. The rate of interest of the accepted all bids was 8.50 per cent yearly.
— New Age
InterContinental’s quarterly profit
slides by third
InterContinental Hotels Group said on Wednesday that its net profit slumped by a third in the first quarter as it relaunched its Holiday Inn brand, but gave a positive outlook even amid economic unrest. The British company said net profit slumped by 34 per cent to 31 million pounds ($61m) in the three months to March 31, compared with the same period in 2007. ‘The credit crunch has had very little impact on our business,’ group chief executive Andrew Cosslett told reporters on a conference call following publication of the results. ‘There has been a lot written about it in the press, but it hasn’t affected our ability to do business and sign-up new customers,’ he added. InterContinental, which owns the Crowne Plaza, also saw profit drop as it lacked a repeat of an exceptional gain won the previous year from the disposal of investments. The hotels group added in its earnings statement that sales increased by 15.3 per cent to 226 million pounds in the three months to March 31 from the same period in 2007. InterContinental shrugged off the effects of the global credit squeeze and signed close on 20,000 new rooms to its worldwide pipeline in the first quarter of 2008. This boosted the group’s overall pipeline to 231,553 rooms — the equivalent of 1,720 hotels — with the bulk of the growth coming in the Americas. Since the credit crunch first took hold last October, the group has opened 190 hotels and signed up over 400 hotels into its development pipeline. ‘This has been a record period for new signings and gives the group the biggest pipeline of hotels development in the industry,’ Cosslett told reporters. Some analysts had been concerned that tighter global credit conditions could have put a brake on InterContinental’s hotel development programme as its franchisees and third party developers found it increasingly difficult to raise cash. There were also worries that a slowing US economy could impact occupancies and growth rates. The group derives more than 70 per cent of its revenues from the United States.
— AFP
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