China's forex reserves rise, but growth slows

SAN FRANCISCO (MarketWatch) -- China's foreign exchange reserves rose 16% in the first quarter from a year ago, but the pace from December slowed, media reports quoting central bank statistics said Saturday.

The country's foreign currency balances, the largest in the world, rose to $1.9537 trillion at the end of March, according to statistics released by the People's Bank of China on its Web site.

The increase was $272 billion higher than March 2008 and $7.7 billion more than in December. The gain from the end of last year was smaller than previous quarterly gains and likely reflected the global financial crisis' hit to exports, analysts said. In the September-December period, reserves increased by $40.4 billion.

China sparked a minor furor in March when officials suggested the U.S. dollar be replaced as an international reserve currency.

The country, the largest foreign holder of U.S. Treasurys, has also said it's worried about the safety of its holdings as the U.S. pursues uncharted monetary policies to jumpstart the U.S. economy.

FOREX-Dollar gains vs yen, buoyed by rally in stocks

* Dollar extends stocks-led gains vs yen, euro

* Many major financial centres shut for Easter weekend

TOKYO, April 10 (Reuters) - The dollar rose against the yen on Friday, buoyed by a rally in U.S. stocks following positive earnings guidance from U.S. bank Wells Fargo (WFC.N), although trade was likely to be thin with many major centres shut for holidays.

Wall Street indexes rose between 3 and 4 percent on Thursday after Wells Fargo said it expected to report a record quarterly profit in an encouraging sign for the troubled banking sector, which has been at the heart of the global financial crisis.[.N]

The greenback hit its highest in six months against the Japanese currency early in the week but then faced a bout of profit-taking on its gains ahead of the long weekend and the onset of quarterly earnings, which tipped it off the peak.

"There's been position-squaring ahead of the Easter holidays and that has been capping dollar/yen and the yen crosses," said Masafumi Yamamoto, head of FX strategy Japan at Royal Bank of Scotland.

"Today the market tried to follow equities."

The dollar rose 0.2 percent to 100.61 yen after climbing 0.8 percent on Thursday. It peaked at 101.45 yen earlier in the week.

The euro eased 0.1 percent to 131.94 yen and lost 0.4 percent to $1.3112.

European Central Bank President Jean-Claude Trichet said the central bank still had some leeway to cut its main interest rate from its record low of 1.25 percent. [ID:nL9724592].

He repeated it would lay out plans for possible unconventional monetary policy measures at its next meeting on May 7 but did not give any details.

The market has been watching for signs the ECB will take unconventional steps to improve credit availability after similar moves by the Federal Reserve and other major central banks.

Fed policy makers warned the U.S. economy would skid more deeply into recession in the coming months but warned it was time to start planning how to wind down spending to avert an inflationary surge. [ID:nN09302273].

The number of U.S. workers filing new claims for unemployment benefit fell last week but was still at levels indicating contraction in the labour market has yet to hit bottom. [ID:nN09264963]. (Reporting by Charlotte Cooper; Editing by Michael Watson)

Forex Quotes

Symbol	Bid	Ask	Time
Nasdaq 100	1334.73	1334.77	18:08
S&P 500 Indx	847.25	847.75	18:08
USD / JPY	100.36	100.39	18:06
Crude Oil	51.86	51.90	18:08
Gold (Spot)	882.83	883.08	18:08
GBP / USD	1.4641	1.4644	18:08
EUR / USD	1.3177	1.3179	18:08

UPDATE 1-Somali pirates vow revenge over comrades' killings

By Abdiqani Hassan

BOSASSO, Somalia, April 12 (Reuters) - Somali pirates threatened revenge on Sunday after two separate hostage-rescue raids by foreign forces killed at least five comrades, raising fears of future bloodshed on the high seas.

The latest raid by U.S. forces on Sunday that saved an American hostage and one by France last week have upped the stakes in shipping lanes off the anarchic Horn of Africa nation where buccaneers have defied foreign naval patrols.

'The French and the Americans will regret starting this killing. We do not kill, but take only ransom. We shall do something to anyone we see as French or American from now,' Hussein, a pirate, told Reuters by satellite phone.

'We cannot know how or whether our friends on the lifeboat died, but this will not stop us from hijacking,' he said.

Sea gangs generally treat their captives well, hoping to fetch top dollar in ransoms.

The worst violence has been an occasional beating.

'We shall revenge,' said another pirate, Aden, in Eyl village, a pirate lair on Somalia's eastern coast.

Some fear the U.S. and French operations may make the modern-day pirates more like their more fearsome forbearers.

'The pirates will know from now that anything can happen. The French are doing this, the Americans are doing it. Things will be more violent from now on,' said Andrew Mwangura of the Kenya-based East African Seafarers Assistance Programme.

'This is a big wake-up to the pirates. It raises the stakes.'

PIRACY ESCALATION

Piracy is lucrative business in Somalia, where gangs have earned millions of dollars in ransoms, splashing it on wives, houses, cars and fancy goods.

After a wane in business early this year, pirates have struck back. They presently hold more than a dozen vessels with about 260 hostages, of whom about 100 are Filipino.

Eyl, Haradheere and other pirate havens along the Indian Ocean coastline have come back to life with the windfall of successful operations.

Somalia's anarchy -- whose 18 years of civil war have given sea gangs assault rifles, grenade launchers and little central control -- has long been ignored by world powers.

The saga over the capture of cargo ship captain Richard Phillips has thrown international attention on the long-running piracy phenomenon that has hiked up insurance costs on strategic waterways where warships now patrol.

'Killing three out of thousands of pirates will only escalate piracy,' said Sheikh Abdullahi Sheikh Abu Yusuf, spokesman of the moderate Islamist group Ahlu Sunna Waljamaca.

(Additional reporting by Andrew Cawthorne in Nairobi and Abdi Sheikh and Abdi Guled in Mogadishu; Writing by Jack Kimball; Editing by Andrew Cawthorne and Jon Boyle) (For full Reuters Africa coverage and to have your say on the top issues, visit: http://af.reuters.com/) Keywords: SOMALIA PIRACY/PIRATES

(nairobi.newsroom@reuters.com; +254 20 222 4717)

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FACTBOX-Five facts about freed U.S. ship captain

April 11 (Reuters) - American ship captain Richard Phillips was rescued by the U.S. Navy on Sunday from the hands of Somali pirates who had held him hostage since trying to hijack his container vessel five days ago in the Indian Ocean.

Following are five facts about the merchant seaman:

* Phillips, aged 53, grew up in Winchester, Massachusetts, where his father coached high school basketball. He lives in Underhill, in rural Vermont.

* Married since 1987 to Andrea Coggio, an emergency room nurse he met in Boston. They have two college-age children, Mariah and Danny.

* Drove a cab in Boston to pay his way through college at the University of Massachusetts and later at the Massachusetts Maritime Academy, where he graduated in 1979.

* Phillips played the saxophone in his high school band, and still plays the instrument from time to time. He listens to the blues. His favorite: blues singer Taj Mahal.

* Plays pickup basketball at the local YMCA, and golfs with a group of retirees. Supports Boston sports teams, particularly the Celtics basketball team.

Source: The New York Times.

(Compiled by World Desk, Washington +1 202-898-8457)

Keywords: SOMALIA PIRACY/CAPTAIN

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RPT-Q&A-Who are the Somali pirates?

By Andrew Cawthorne

NAIROBI, April 12 (Reuters) - It took the capture and rescue five days later of an American hostage to draw world attention back to the long-running phenomenon of Somali piracy.

The pirates also grabbed headlines last year for the world's largest sea hijack -- a Saudi supertanker carrying oil worth $100 million -- and the seizure of a Ukrainian ship with a huge military cargo including 33 tanks.

Away from the international limelight, the gangs have been striking regularly for years. After the rescue of U.S. ship captain Richard Phillips, they still hold about 260 hostages, including nearly 100 Filipinos, on 17 captured vessels.

So who are these modern-day buccaneers?

HOW DID THEY START?

* When warlords toppled former dictator Mohamed Siad Barre in 1991, Somalia collapsed into anarchy. That led to a wave of illegal fishing, plus dumping of toxic and industrial waste, in Somali waters by foreign fleets from Europe and Asia.

* Towards the end of the decade, local fishermen and militia formed groups with names like the 'Somali Coastguards' and the 'National Volunteer Coastguards', to drive away or apprehend the vessels from South Korea, Italy, Spain, Thailand and elsewhere.

* Seeing how easy it was to capture ships, those groups metamorphosed this decade into old-fashioned pirate gangs, becoming ever more sophisticated in methods and bold in range.

HOW DO THEY OPERATE?

* In the early days, pirates with a few guns used fishing boats to approach vessels, and then simply tried to scramble on board or throw up ropes.

* As they gained money from ransoms, plus experience, they bought speedboats, tracking devices and more powerful weapons. Typically these days, a 'mother ship' first spots a target, and a couple of speedboats are then launched to approach the vessel on either side and board with hooks and ladders.

* Pirates sometimes fire shots over the bow to scare sailors. Often, boats will try defensive action like zigzagging in the sea or even spraying the pirates with water from high pressure hoses. Most vessels, however, are unarmed, in keeping with international maritime practice, so sailors normally surrender quickly once the pirates are on deck.

* Hostages say they are generally well treated, with the pirates viewing them as common men caught up in a wider game: the pursuit of million-dollar ransoms from owners. Some have described the pirates slaughtering and roasting goats on board to feed them, and passing round satellite phones to let them call loved ones back home.

HOW MANY ARE THERE?

* Although traditional elders disapprove and condemn them as 'immoral', the number of pirates is growing, with hundreds now working in a network of gangs.

* Many poor and unemployed young Somalis see piracy as a dazzling alternative to their hard lives, given the quick money to be made. Somalis say they are lining up to go to sea.

* The gangs are based in villages and small towns along Somalia's long coast, in lairs like Eyl, Hobyo and Haradheere.

HOW MUCH MONEY ARE THEY MAKING?

* Ship owners have been paying increasingly high ransoms with regularity. Earlier this year, the pirates made more than $6 million from the negotiated release of the Saudi supertanker the Sirius Star and the Ukrainian vessel the MV Faina.

* Ransoms during 2008, when 42 vessels were captured, ranged from $500,000 to $2 million, experts say.

* The pirates reinvest some of their money in better equipment and boats. They also spend plenty of it on flashy living, taking new wives, building palatial villas and buying 4x4 vehicles. Some get involved in smuggling.

* Financiers and masterminds, who are generally older than the young pirates, take a large cut of ransoms.

* Local rulers also take a share to allow the pirates to operate unchecked out of their territories.

WHAT CAN THE WORLD DO?

* All analysts agree that the best way to suppress piracy off Somalia is to achieve stability onshore, where civil conflict has raged for the last 18 years.

* Fourteen attempts to restore central government have failed since 1991, and a 15th one is in its infancy. The United Nations and others are hopeful that the administration of President Sheikh Sharif Ahmed, set up earlier this year, is the best chance in recent times of bringing peace to Somalia.

* Ahmed is a moderate Islamist with widespread support inside and outside Somalia, but he faces an insurgency by pro-al Qaeda militant Islamists and his government really controls little but a few parts of the capital Mogadishu.

* At sea, more than a dozen countries have provided ships for a flotilla of naval patrols off Somalia since the end of 2008. That brought an initial dip in the number of attacks, especially in the Gulf of Aden, where the patrols were concentrated. But the ever more brazen pirates have simply moved their operations further out into the Indian Ocean.

WHAT ARE THE CONSEQUENCES?

* Though world attention has been focused on Phillips the American and his rescue, Somali piracy causes enormous hardship and stress for the hundreds of hostages still caught up in it, mainly from the Third World. Released captives say they live in constant fear of being killed by the pirates or during a rescue attempt, and worry about wives and children far away. Some said pirates beat them, though in general their treatment is humane.

* Some shippers have decided to incur the extra cost and time of sending cargoes round South Africa instead of through the Gulf of Aden into the Suez Canal en route to Europe.

* Insurance premiums have risen for the whole industry.

* Somalia has suddenly come into President Barack Obama's foreign policy in-tray. Americans will shudder at the memory of a disastrous U.S. intervention in the early 1990s, including the 1993 'Black Hawk Down' battle when 18 U.S. servicemen were killed.

(Editing by Daniel Wallis)

((nairobi.newsroom@reuters.com; +254 20 222 4717)) Keywords: SOMALIA PIRACY/

(For full Reuters Africa coverage and to have your say on the top issues, visit: http:/af.reuters.com/)

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WRAPUP 10-U.S. Navy rescues captain, kills Somali pirates

By Abdi Sheikh and Abdi Guled

MOGADISHU, April 12 (Reuters) - U.S. naval forces rescued cargo ship captain Richard Phillips from captivity at the hands of Somali pirates in a dramatic shootout that ended a five-day standoff, the U.S. Navy said on Sunday.

Phillips' life was in danger when naval forces shot the pirates, freeing him unharmed and killing three of four pirates who had held him hostage on a lifeboat after trying to seize his vessel, the navy said. The fourth pirate was in custody.

'I can tell you that he is free and that he is safe,' Navy Lieutenant Commander John Daniels said.

The U.S. Navy believed that Phillips, who tried to escape on Friday, faced imminent danger amid tense hostage talks with his captors and deteriorating sea conditions.

'They were pointing the AK-47s at the captain,' Vice Adm. William Gortney, head of the U.S. Naval Central Command, said in a Pentagon briefing from Bahrain.

President Barack Obama had granted the Pentagon's request for standing authority to use appropriate force to save the life of the captain, he said.

The U.S. Navy 5th Fleet in Bahrain said the rescue took place at 12:19 p.m. EDT (1619 GMT) and the lifeboat had drifted to about 20 miles (32 km) from lawless Somalia's coast.

Phillips, captain of the U.S.-flagged Maersk Alabama container ship, had contacted his family, received a routine medical evaluation, and was resting comfortably aboard the amphibious assault ship USS Boxer.

'We are all absolutely thrilled to learn that Richard is safe and will be reunited with his family,' Maersk Line chief executive John Reinhart said in a statement.

CNN showed a photo of a smiling Phillips after his rescue.

Phillips' crew let off flares, hoisted an American flag and jumped for joy at news of their captain's rescue.

'We are very happy. He's a hero,' one crew member of the Maersk Alabama shouted at journalists amid raucous celebrations on the deck of the vessel, docked in Kenya's Mombasa port.

Phillips, 53, was the first American taken captive by Somali pirate gangs who have marauded in the busy Gulf of Aden and Indian Ocean shipping lanes for years.

Three U.S. warships had been watching the situation.

PIRATES VOW REVENGE

Obama, spared from having another thorny foreign policy crisis added to his troubles with the U.S. economic meltdown and Afghanistan, welcomed the rescue, praised the U.S. military and vowed to curb rampant piracy.

'To achieve that goal, we must continue to work with our partners to prevent future attacks, be prepared to interdict acts of piracy and ensure that those who commit acts of piracy are held accountable for their crimes,' he said in a statement.

Somali pirates were quick to vow revenge over Sunday's shooting, as well as a French military assault to rescue a yacht on Friday.

'The French and the Americans will regret starting this killing. We do not kill, but take only ransom. We shall do something to anyone we see as French or American from now,' Hussein, a pirate, told Reuters by satellite phone.

The Maersk Alabama, a container ship carrying food aid for Somalis, was attacked far out in the Indian Ocean on Wednesday, but its 20 American crew apparently fought off the pirates and regained control.

Phillips volunteered to go with the pirates in a Maersk Alabama lifeboat in exchange for the crew, said Vice Adm. Bill Gortney, commander, U.S. Naval Forces Central Command.

'The actions of Captain Phillips and the civilian mariners of Maersk-Alabama were heroic. They fought back to regain control of their ship, and Captain Phillips selflessly put his life in the hands of these armed criminals in order to protect his crew,' he said in a statement.

Joseph Murphy, whose son, Shane, was Phillips's second in command and took over the Alabama after pirates left with Phillips, said in a statement read by CNN, 'Our prayers have been answered on this Easter Sunday.'

'My son and our family will forever be indebted to Capt. Phillips for his bravery. If not for his incredible personal sacrifice, this kidnapping -- an act of terror -- could have turned out much worse,' said Murphy.

'The captain is a hero,' one crew member shouted from the 17,000-ton ship as it docked in Kenya's Mombasa port under darkness on Saturday. 'He saved our lives by giving himself up.'

LEGAL SYSTEM NEEDED

Experts had expected a quick end to the standoff, but the pirates held out for both a ransom and safe passage home. Friends told Reuters the gang wanted $2 million.

The saga has drawn world attention to the long-running piracy phenomenon off Somalia that has hiked shipping insurance costs and disrupted international trade.

Andrew Mwangura, coordinator of Mombasa-based East African Seafarers Assistance Program, said the rescue would change the stakes in future pirate attacks.

'This is a big wake-up to the pirates. It raises the stakes. Now they may be more violent, like the pirates of old,' he said.

Pirates have generally treated hostages well, sometimes roasting goat meat for them and even passing phones round so they can call loved ones. The worst violence reported has been the occasional beating and no hostages are known to have been killed by pirates.

The drama underscored a need for new international agreements to allow other countries to protect shipments in Somali waters and try pirates, U.S. Coast Guard Commandant Adm. Thad Allen told U.S. net work ABC's 'This Week'.

The U.S. Justice Department said in a statement it 'will be reviewing the evidence and other issues to determine whether to seek prosecution in the United States.'

(Additional reporting by David Morgan and Randall Mikkelsen in Washington, Abdi Sheikh and Ibrahim Mohamed in Mogadishu, Jack Kimball, Celestine Achieng and Njuwa Maina in Mombasa, Andrew Cawthorne and Abdiaziz Hassan in Nairobi; Writing by Paul Eckert; Editing by Doina Chiacu)

((nairobi.newsroom@reuters.com; +254 20 222 4717)) Keywords: SOMALIA PIRACY/

(For full Reuters Africa coverage and to have your say on the top issues, visit: http:af.reuters.com/)

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UPDATE 1-U.S. acted after pirates aimed at ship captain

WASHINGTON, April 12 (Reuters) - President Barack Obama authorized killing the Somali pirates holding U.S. cargo ship captain Richard Phillips, and a commander acted upon concluding the pirates were about to kill the hostage, a U.S. Navy official said on Sunday.

'They were pointing the AK-47s at the captain,' Vice Adm. William Gortney, head of the U.S. Naval Central Command, said in a Pentagon briefing from Bahrain.

Gortney also said Washington had rejected ransom negotiations with the pirates. 'The United States government's policy is to not negotiate,' he said.

But he said military members had been in hostage talks with the pirate crew, and the talks grew 'heated' before the commander on the scene ordered the shots that killed three pirates holding Phillips in a lifeboat.

'If he was not in imminent danger, they were not supposed to take this sort of action, they were supposed to let the negotiation process work it out,' Gortney said.

'The on-scene commander took it as the captain was in imminent danger and then made that decision (to kill the pirates), and he had the authorities to make that decision, and he had seconds to make that decision.'

'Our authorities came directly from the president. And the number one authority for incidents, if we were going to respond, was if the captain's life was in immediate danger,' Gortney said.

The U.S. Justice Department, which is reviewing how to prosecute the lone pirate taken into custody, wants to take him to Kenya, which recently signed a piracy prosecution deal with Washington, Gortney said. It was also possible the pirate could be taken to the United States, he said.

(Reporting by Randall Mikkelsen; Editing by Eric Walsh) Keywords: SOMALIA PIRACY/MILITARY

(randall.mikkelsen@thomsonreuters.com; +1 202 898 8300; Reuters Messaging: randall.mikkelsen.reuters.com@reuters.net)

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AB InBev considering Rolling Rock sale

NEW YORK, April 12 (Reuters) - Anheuser-Busch InBev , the world's largest brewer, is considering selling its Rolling Rock brand, The Wall Street Journal reported on Sunday, citing people familiar with the matter.

InBev sold Anheuser-Busch the iconic Rolling Rock brand for $82 million in May 2006 and reacquired it when it bought Anheuser-Busch for about $52 billion last year.

The Journal, citing one person familiar with the matter, said AB InBev looked at bids for the brand earlier this year using investment bank Lazard Ltd., but wasn't satisfied with the offers.

The paper said the brewer remains interested in selling Rolling Rock.

AB InBev spokeswoman Marianne Amssoms declined to comment

(Reporting by Michael Erman; Editing by Leslie Adler) Keywords: ABINBEV/ROLLINGROCK

(Reuters Messaging: michael.erman.reuters.com@reuters.net; +1 646 223 6021)

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China end-March FX reserves hit $1.9537 trln -PBOC

BEIJING/SHANGHAI, April 11 (Reuters) - China's foreign

exchange reserves, the world's largest, rose by about $7.7

billion in the first quarter to $1.9537 trillion at the end of

March, the central bank said on Saturday.

The figure was slightly below the median forecast of $1.955

trillion in a Reuters poll of 10 economists.

For all of 2008, the foreign exchange reserves rose by $417.8

billion, compared with increases of $461.9 billion in 2007,

$247.3 billion in 2006 and $209 billion in 2005.

China's reserves have ballooned as the central bank, in order

to hold down the yuan, has bought most of the dollars generated

by a large trade surplus, foreign direct investment and periodic

inflows of speculative capital.

The inflows have slowed in recent quarters as the global

economic slowdown has hit trade and investment flows.

Foreign exchange reserves (in billions of dollars, period

ending):

Mar09 Dec08 Sep08 Jun08 Mar08 Dec07 Sep07

1,953.7 1,946.0 1,905.6 1,808.8 1,682.2 1,528.2 1,433.6

(Reporting by Zhou Xin and Edmund Klamann; Editing by Tomasz

Janowski)

((edmund.klamann@reuters.com; +86 21 6104 1799; Reuters

Messaging: edmund.klamann.reuters.com@reuters.net))

Keywords: CHINA ECONOMY/RESERVES

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Indonesian stocks seen edging up after election

JAKARTA, April 12 (Reuters) - Indonesian stocks may rise slightly and the rupiah is likely to trade at current levels when markets open on Monday, analysts said, after the president's party led with one fifth of the votes in last week's election.

President Susilo Bambang Yudhoyono's Democrat Party raised its share to 20.5 percent, from 7.5 percent in 2004, quick count and early official results showed.

The results were in line with market expectations but below the level indicated by some recent opinion polls, reducing hopes that Yudhoyono would be able to push ahead with sweeping reforms of the judiciary, civil service and other institutions considered key to attracting more foreign investment.

Analysts said the results meant 'business as usual', with Yudhoyono continuing his existing policies of tackling graft and addressing economic growth, but that he would find it harder to form a strong cabinet to push tough reforms through parliament.

'The elections have been largely peaceful and smooth. This should help bolster sentiment in the stock market,' said Tjandra Lienandjaya, an analyst at BNP Paribas.

Yudhoyono said last week he would start coalition talks with other parties ahead of presidential elections in July, which he is tipped to win. Several other parties are also in talks about forming rival blocs to field presidential candidates.

For a scenarios on possible coalition outcomes, click on

Indonesia's benchmark stock index, which lost about half its value last year, has risen 8 percent this year to end at 1,465.75 on Wednesday.

The financial markets were shut for holidays on Thursday and Friday. The rupiah currency also firmed ahead of the election to around 11,300 per dollar.

Favourable external factors such as a sharp rise in U.S. stocks on Thursday, before the holiday weekend, as well as strong gains in the rupiah and expectations of a further easing in inflation should help the bond market, which has rallied in the past month, analysts said.

'Foreign investors are likely to continue coming in. They have started coming in for about a month,' said Francis Tjahjo Soetopo, Jakarta-based debt analyst at Deutsche Bank, adding that bond prices would therefore probably remain firm.

'If the rupiah keeps strengthening, there will be more demand for bonds as well as stocks,' he said.

Soetopo said he expected the one-year bond yield could head lower to 8 percent from 9 to 9.3 percent currently, pushing mid- and longer-term yields as well.

Economists noted that the government has already raised a significant portion of this year's borrowing requirement, which means investors are less concerned about Indonesia's ability to fund its budget deficit.

THey said that investors would see the Democrat Party's performance as providing continuity in policy, provided the early results proved accurate.

'It means the current policy can be maintained, and those certainties will prompt a positive reaction,' said Djoko Retnadi, an economist at Bank BRI.

(Reporting by Gde Anugrah Arka and Sonya Angraini in Jakarta; Writing by Sara Webb; Editing by Kazunori Takada)

((ga.arka@thomsonreuters.com; Reuters Messaging: ga.arka.reuters.com@reuters.net; +62 21 384 6364 ext 911)) Keywords: INDONESIA MARKETS/

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Zimbabwe shelves own currency for a year-paper

HARARE, April 12 (Reuters) - Zimbabwe will not use its own local currency for at least a year, a state newspaper reported on Sunday, while it tries to repair an economy which critics say was destroyed by President Robert Mugabe.

The southern African state has allowed the use of multiple foreign currencies since January to stem hyperinflation which had rocketed to over 230 million percent and left the Zimbabwe dollar almost worthless.

The state-controlled Sunday Mail said the unity government of Mugabe and opposition leader Morgan Tsvangirai decided the Zimbabwe dollar should only be reintroduced when industrial output reaches about 60 percent of capacity from the current 20 percent average.

'The Zimbabwe dollar will be out for at least a year. We resolved that there will be no immediate plans to (re)introduce the money because there is nothing to support and hold its value,' the newspaper quoted Economic Planning and Development Minister Elton Mangoma as saying.

'Our focus is to first ensure that we have a vibrant industry. If we try to reintroduce the local currency now, it will face the same fate of being wiped out of its value within weeks.'

On Thursday, Zimbabwe's Central Statistical Office (CSO) said consumer prices fell for a third straight month in March after the government abandoned its worthless currency.

The CSO said inflation stood at -3.0 percent month-on-month in March compared with -3.1 percent in February, as food prices fell.

Critics say Mugabe, who has led Zimbabwe since independence from Britain in 1980, has destroyed one of Africa's most promising economies through controversial policies, including the seizure of white-owned commercial farms for redistribution to inexperienced black farmers.

Mugabe, 85, denies the charge and says the economy has been sabotaged by enemies opposed to his nationalist policies.

Zimbabwe is seeking an urgent cash injection of $2 billion to stabilise an economy suffering unemployment above 90 percent and a severe shortage of foreign currency.

Western donors have held back aid, demanding the unity government in which Tsvangirai is the prime minister undertakes political and other reforms.

(Reporting by Cris Chinaka; Editing by Sophie Hares) Keywords: ZIMBABWE CURRENCY/

(cris.chinaka@reuters.com; +263 4 799 112)

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Ideal World Forex Announces New Forex Resources Page

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WORLD FOREX: Euro Hits 3-Week Low In Thin Holiday Trade

NEW YORK (Dow Jones)--In thin holiday trading, the euro extended a week-long decline overnight Friday to more than a three-week low against the dollar.

The common currency has now totally unwound its gains versus the dollar in the wake of the Federal Reserve's mid-March decision to purchase longer-term Treasury notes and bonds. Profit-taking and positioning ahead of the Easter break was behind much of the euro's slide this week.

The dollar had also been supported by a report Thursday that showed the U.S. trade gap shrank to its narrowest deficit in nearly a decade and on a strong first-quarter earnings

3rd UPDATE:Citic Pacific Hit By FX Trades; Chmn Vows Rebound

Citic Pacific Ltd.'s (0267.HK) foreign exchange scandal pushed it to a full-year loss of HK$12.66 billion (US$1.62 billion), but the conglomerate says it will return to profitability in 2009.

"Now that we have put the issues of 2008 behind us we are focused on the future," Chairman Larry Yung told a news conference.

"Our balance sheet is solid, with debt maturity well structured in anticipation of cash flows from our businesses," Yung said. But he warned the economic slump will harm Citic Pacific's steel and property operations this year.

Although Yung sought to answer questions about the forex scandal by saying the company had moved past it, an investigation by Hong Kong's Securities and Futures Commission is still under way. Yung said he doesn't know when the probe will be completed, declining further comment.

Citic Pacific, which has power, property, aviation, ore and steel operations, said it swung to a net loss of HK$12.66 billion for the 12 months ended Dec. 31, from a restated net profit of HK$10.84 billion a year earlier.

The company's first-ever annual loss was wider than the average forecast of HK$11.69 billion in a Thomson Reuters survey of three analysts.

J.P. Morgan analyst Billy Ng said he expects Citic Pacific can return to profitability this year, though the aviation and steel businesses will remain under pressure.

"The timing of a recovery in specialty steel is uncertain, and visibilty on the iron ore project remains low," Ng said.

Citic Pacific's shares fell 8% Wednesday, closing at HK$8.96 after partially bouncing back from losses of as much as 10.2% on the day.

Citic Pacific said revenue rose 20% last year to HK$46.42 billion from HK$38.53 billion.

Citic Pacific directors won't get a bonus for 2008 because of the loss, Yung said, and shareholders won't get a dividend.

Citic Pacific disclosed Oct. 20 it faced billions of dollars in losses over what it called unauthorized forex bets by two executives who left the company. The trades were made through an arrangement known as an "accumulator" that gave Citic Pacific limited upside but unlimited downside, and they turned bad when the Australian dollar unexpectedly fell against the U.S. dollar.

Citic Pacific said Wednesday it booked realized and mark-to-market losses of HK$14.63 billion over the bets.

The conglomerate came under intense criticism after it was revealed the board found out about the trades Sept. 7, about six weeks before the disclosure.

Citic Pacific's state-owned parent, Citic Group, ended up taking over most of the currency bets in exchange for a stake in the listed unit.

The timing of the disclosure is believed to be a focus of the SFC investigation, though the SFC and Citic Pacific have declined comment on specifics.

Yung said that the 2008 loss won't force Citic Pacific to sell any assets, but weak demand for iron ore has prompted it to delay the opening of a mine in western Australia by a year, to the third quarter of 2010.

Citic Pacific, which owns 80% of the mine project, said earlier it planned to produce 27.7 million metric tons a year of a mix of ore concentrate and iron pellets. The company acquired the rights to mine 2 billion metric tons of iron ore in Western Australia's Pilbara region in 2006.

Citic Pacific said Wednesday two directors from its parent, Zhang Jijing and Ju Weimin, were named as non-executive directors of the listed company, effective April 1.

HK's Citic Pacific records $1.6 bln loss in 2008

HONG KONG: Citic Pacific Ltd., the Hong Kong arm of a Chinese government investment firm, said Wednesday it suffered a massive loss last year after making bad currency bets, but maintained its finances were secure.

The company reported 12.7 billion Hong Kong dollars ($1.6 billion) net loss for 2008, compared to a profit of HK$10.8 billion in 2007, the company said in a statement.

Wrongway bets in the currency market were largely to blame, costing the company HK$14.6 billion (US$1.9 billion), according to the statement.

Citic Pacific stunned investors last year when it revealed huge losses from bad bets on leveraged foreign currency contracts, prompting the company to seek a $1.5 billion bailout from its Beijing-based parent company Citic Group.

Chairman Larry Yung expected the impact of the bad currency bets to diminish and said the company would turn a profit this year.
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"We've already put aside provisions from last year for most of the bets, so we think it will be normal profit for us," Yung said at a news conference in Hong Kong.

The vast conglomerate, whose dealings run from airlines to mining and Wal-Mart stores, also said it is "financially secure" following the bailout. However, maturing debt in the next years requires refinancing which will begin shortly, Citic Pacific said in the statement.

The company recommended against a final dividend and directors will not receive bonuses for last year, the statement said.

CITIC Pacific posted its first annual loss in almost two decades after wrong-way bets on the Australian dollar forced it to seek a bailout from China.

et loss was $HK12.7 billion ($2.35 billion), or $HK5.68 a share, for 2008, compared with a profit of $HK10.8 billion, or $HK4.90, a year earlier, the Hong Kong-listed company said yesterday.

That compares with the $HK11.2 billion loss median estimate of five analysts surveyed by Bloomberg.

Sales rose 21 per cent to $HK46.4 billion.

Citic Pacific plunged 81 per cent in 2008, making it the second-worst performing stock on Hong Kong's benchmark index after losses on Australian dollar bets forced it to seek $US1.5 billion ($2.15 billion) of aid from state-owned parent Citic Group.

Citic Pacific said it had a $HK14.6 billion realised and marked-to-market loss after tax on foreign exchange contracts.

"What really matters now is the company's guidance on its underlying businesses, as most of them -- such as aviation and steel production -- are quite cyclical," Billy Ng, a Hong Kong-based analyst at JPMorgan Chase, said before the earnings statement.

"The exchange loss is no surprise and is reflected in the share price."

Citic Pacific, which also develops property, faces dwindling demand because of the global recession. The stock has gained 14.6 per cent this year, compared with the 3.8 per cent drop in the Hang Seng index.

Cathay Pacific, Hong Kong's biggest carrier, which is 17.5 per cent owned by Citic Pacific, on March 11 reported an annual loss of $HK8.56 billion after making wrong bets on fuel prices and as the global recession crimped travel.

Citic Pacific bought currency contracts to fund a $1.6 billion iron ore mine in Australia. The company had expected the Australian dollar would rise, and incurred losses after the currency tumbled against its US counterpart.

Citic Pacific's chairman Larry Yung and managing director Henry Fan were among 17 directors being probed by the Securities and Futures Commission, the company said on January 2. The commission did not say what the probe was about.

The board has been criticised for a six-week delay in revealing the losses by lawmakers and shareholder activist David Webb.

"Investors will need some time to rebuild their confidence in the company," said JPMorgan's Mr Ng, who recommends that investors "underweight" Citic Pacific shares.

According to Citic Pacific's website, the company was listed in 1991 after it bought a 49 per cent stake in Tylfull Company and changed names.

Citic Pacific dips into red ink on forex losses Omits final dividend, won't pay directors' bonuses; chairman sees tough 2009

HONG KONG (MarketWatch) -- Diversified conglomerate Citic Pacific said Wednesday it swung to a loss of HK$12.66 billion ($1.62 billion) in 2008 after suffering HK$14.63 billion in losses on a number of foreign exchange contracts.
The company's 2007 net income stood at HK$10.84 billion.
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CTPCY 5.81, -0.40, -6.4%) , which has interests in steel making, mining, power generation and trading, infrastructure and air-cargo services, said the board has also decided to scrap final dividend payment and not pay any bonuses to directors for 2008.
Chart of HK:267
"Our company is financially secure following the re-capitalization by the Citic Group," the company said in a statement, referring to its Chinese state-owned parent.
"Shareholders' funds stood at HK$50 billion at 31 December 2008. ... Maturing debt in the next few years requires re-financing and, considering today's environment, work on this will begin shortly," it said.
The company's revenue increased 20% to HK$46.42 bililon.
Chairman Larry Yung said Citic Pacific is facing a difficult operating environment in 2009, "which will impact this year's performance."
Still, "as we look at global economic conditions and compare the situation in China, we remain encouraged. We have sufficient resources and are well placed to capture future opportunities," Yung said.

US and Europe Reject Chinese Bid for New Global Currency

US and European policymakers are standing behind the dollar as the world's reserve currency. Their comments followed a Chinese bid to see the currency replaced by International Monetary Fund coinage.



An upcoming global economic summit could turn into a showdown over the dollar as the world's reserve currency.

China has publicly thrown its support behind other emerging economies such as Russia which want to shift the world's currency away from the dollar to a new currency run by the International Monetary Fund (IMF).

"The outbreak of the crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system," People's Bank of China Governor Zhou Xiaochuan said in a speech posted on the People's Bank of China's Web site.

Analysts say Zhou's recent comments are the latest sign of the country's growing assertiveness on the international stage. They also show a growing concern China has over the $1.7 trillion (1.3 trillion euros) it holds in US treasury bonds and reserve dollars.

US, Europe want dollar to stay

Obama gestures at a press conferenceBildunterschrift: Großansicht des Bildes mit der Bildunterschrift: Obama doesn't see the need for a global currency

The United States and Europe have dismissed the idea of doing away with the dollar as the international reserve currency. The European Union's top economic official said he thinks the dollar will remain the world's major reserve currency.

EU Commissioner Joaquin Almunia said he doesn't see "major structural changes in the role the dollar plays today as a major reserve currency."

Top US leaders, including President Barack Obama, said they want the dollar to keep its current status.

"I don't believe there is a need for a global currency," US President Barack Obama said at a press conference on Tuesday.

He noted that "the dollar is extraordinarily strong right now," and although the United States was "going through a rough patch" at present, the dollar enjoyed a "great deal of confidence" from investors.

Both US Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke said they would not support a plan to strip the dollar of its reserve status.

Issue likely to be debated at G20 summit

International Monetary Fund logoBildunterschrift: Großansicht des Bildes mit der Bildunterschrift: China would like to see the IMF take a more prominent role

Yet the idea is likely to be floated anyway at an upcoming Group of 20 summit planned for London in April. The meeting of industrialized countries will bring together top leaders in hopes of finding a common approach to the global financial crisis.

People's Bank of China Governor Zhou Xiaochuan said he would support moving away from the dollar to an IMF currency basket that would include a mixture of dollars, euros, sterling and yen. The IMF already created an international reserve asset in 1969, but the Special Drawing Rights, as it is called, is currently used only by governments and international institutions.

Russia has said it will bring up the proposal at the upcoming G20 meeting in London. Russia said its has broad support for its proposal among countries such as Brazil, India, China, South Korea and South Africa.

Not likely to happen anytime soon

In the near-term, such a radical departure from the way the global financial system works would be near impossible, economists say, although it could be feasible in the long term.

"The arguments for doing such a thing have economic merit, though the actual implementation of such a system would likely take a Herculean effort and a great deal of consensus building amongst economic powers," Sacha Tihanyi, currency strategist with Scotia Capital told AFP news agency.

"This is an idea, the idea of a global currency, determined by multilateral organizations, which is not new, but it's a serious proposal," John Lipsky, the IMF's first deputy managing director, said at a news conference in response to a question about China's proposal.

China growing more assertive

A man examines stock update on a display at a stock brokerage in Beijing, ChinaBildunterschrift: Großansicht des Bildes mit der Bildunterschrift: China is the biggest US creditor

The recent comments by China's top banker follows on comments made by China's Premier earlier this month. They show how concerned the country is about its US assets.

"We have lent huge amounts of money to the United States. Of course we are concerned about the safety of our assets," Chinese Premier Wen Jiabao said two weeks ago.

China holds US Treasury bonds worth $739.6 billion as of January. It is also the world's largest holder of US dollars as a reserve currency, holding more than $1 trillion, according to US government figures.

"China appears to be growing more and more assertive over its rights," currency analyst Andrew Busch of BMO Capital Markets told AFP news agency.

The dollar, which was installed as the reserve currency after World War II, has been regarded as a "safe haven" by international investors up to now.

How to Destroy the Dollar Without Really Trying

Geithner, at the Council on Foreign Relations, said the U.S. is "open" to a headline-grabbing proposal by the governor of the China's central bank, which was widely reported as being a call for a new global currency to replace the dollar, but which Geithner described as more modest and "evolutionary."

"I haven’t read the governor’s proposal. He’s a very thoughtful, very careful distinguished central banker. I generally find him sensible on every issue," Geithner said, saying that however his interpretation of the proposal was to increase the use of International Monetary Fund's special drawing rights -- shares in the body held by its members -- not creating a new currency in the literal sense.

"We’re actually quite open to that suggestion – you should see it as rather evolutionary rather building on the current architecture rather than moving us to global monetary union," he said.

At last night's presser, Obama was asked about the Chinese proposal (maybe Geithner didn't watch?) and took the rather old fashioned view that the dollar should continue to serve as the world's currency because the United States is "the strongest economy in the world, with the most stable political system in the world." Sensing a potential firestorm, Smith reports that the moderator at Geithner's event went back to the Treasury Secretary to give him a second chance at answering the question. Geithner then gave the more conventional response that the U.S. government "will do what's necessary to say we're sustaining confidence in our financial markets."