NEWS / Foreign Exchange

Brazil's central bank kept its benchmark lending rate unchanged at 11.25 percent

LATIN AMERICA

Argentina

A group representing U.S. holdouts from Argentina's $104 billion defaulted-debt restructuring in 2005 asked the Paris Club to pressure the South American country to enter negotiations. American Task Force Argentina said in a letter to the Paris Club that Argentina is violating international standards in refusing to negotiate with the holdouts. ``We urge the Paris Club to communicate to Argentina that a reasonable, timely, debt payment agreement can be reached with all creditors,'' the letter said. The missive also was sent to finance ministers of the group, which includes the U.S., Japan and Germany. The complaint comes as Argentine officials prepare to attend the Oct. 20-22 annual meetings of the International Monetary Fund in Washington. Argentina's economy ministry said the delegation will seek an agreement with the IMF that would allow the country to restart payments on about $6.1 billion of Paris Club debt. Argentina paid its entire $10.3 billion debt to the IMF in 2006, a year after the country restructured $104 billion in bonds, paying investors who accepted its offer of about 30 cents on the dollar. Holders of $20 billion in bonds refused the deal, saying it wasn't enough. President Nestor Kirchner subsequently signed a law blocking the government from making a second offer to creditors.
Inflationary pressures are building in Argentina and there is room for further interest rate increases, a senior IMF official said. "Interest rates remain negative in real terms. We think there is room for further monetary tightening," Charles Collyns, deputy director of the IMF's research department told a news conference.

Brazil

Brazil's central bank kept its benchmark lending rate unchanged at 11.25 percent, pausing for the first time after 18 consecutive rate cuts as inflation gains steam and economic activity quickens. The bank's monetary policy committee, known as Copom, voted unanimously to leave the so-called Selic rate steady at an all-time low, ending a two-year cycle of interest- rate cuts. Policymakers had slashed the Selic by 8.5 percentage points since September 2005, the longest string of rate cuts in Brazilian history.
Brazil's central bank President Henrique Meirelles said the country's planned sovereign wealth fund won't be established until foreign reserves at least match the country's total foreign debt. Brazil's net borrowing, or total foreign debt minus reserves, is about $25 billion more than the country's total reserves of about $162 billion, Meirelles told reporters in Washington.

Mexico

Mexico's industrial production rose more than analysts expected in August, led by a surge in automobile manufacturing. Output climbed 2.6 percent from the same month a year earlier after rising a revised 2.2 percent in July, the government said in a statement.
Mexico's peso gained as oil prices approached a record high, boosting foreign currency inflows to the thirdlargest provider of crude to the U.S. The peso rose 0.04 percent to 10.8147 per dollar on Thursday. The peso has gained 1.1 percent this month.

Venezuela

Fitch Ratings revised its long-term foreign and local currency credit outlook on Venezuela to negative from stable, citing an ???increasingly unstable macroeconomic policy framework.??? The ratings agency affirmed its BBrating but said the unstable framework ???has resulted in greater vulnerability of external and public sector accounts to a decline in oil prices, an inability to significantly reduce inflation, and a widening of the spread between the official and parallel market exchange rates???.

AFRICA & MIDDLE EAST

Nigeria

Nigeria's inflation slowed to 4.1 percent in September, after the cost of cooking gas, electricity and telephone calls fell, the National Bureau of Statistics said. The inflation rate fell for the third straight month from 4.2 percent in August, the Abuja-based agency said on its Web site.

ASIA

China

Europe's soaring trade deficit with China is heightening tensions over the weakness of the yuan ahead of a meeting of the Group of Seven nations. The euro-area trade gap with China widened 25 percent to a record 59.9 billion euros ($85.6 billion) in the seven months through July, the European Union's statistics office in Luxembourg said. Imports from China rose 21 percent, outpacing the 15 percent gain in European shipments in the opposite direction. The widening deficit may add to friction between China and Europe as the G-7 meets in Washington.

India

India's Finance Minister Palaniappan Chidambaram said proposed curbs on overseas investments that sparked a 10 percent slump in stocks this week are aimed at moderating the record inflows and not a ban on funds. ``It is common knowledge that developed countries have injected a considerable amount of liquidity into their own markets to overcome their own problems,'' Chidambaram told a gathering of investors in New York. ``Part of that liquidity has spilled into India and certain other countries. Therefore it is necessary to moderate the flow of funds.''

Indonesia

Indonesia earned a ratings upgrade from Moody??™s Investors Service, impressed by the government??™s fiscal prudence and falling debt levels. Moody??™s raised Indonesia??™s foreign- and local-currency bond ratings to Ba3 from B1, bringing the ratings to three notches below investment grade and in line with ratings assigned by both Standard & Poor??™s and Fitch. The ratings outlook was stable.

Philippines

The Philippines beat its September budget deficit target by 15 percent after lower interest payments cut spending, but revenue growth for the year was seen driven by asset sales rather than better tax collection. The Southeast Asian country clocked a smaller shortfall of 14.5 billion pesos ($325.8 million) in September against a deficit goal of 17.05 billion pesos after revenues doubled at the Bureau of Treasury and spending dipped below target. It was the Philippines' first monthly budget deficit in four months. The last time it posted a deficit was in May.

Turkey

Turkey's parliament resoundingly approved a motion allowing troops to cross into northern Iraq to hunt down Kurdish rebels there, but its Western allies and Baghdad urged Ankara to refrain from military action. As parliament voted in Ankara by 507 votes to 19 in favour of the motion, U.S. President George W. Bush said it would not be in NATO member Turkey's interests to send troops into Iraq and the Pentagon said it did not think Ankara had the appetite for such a move.
Turkey's central bank lowered its benchmark interest rate by a half point, the deepest cut in more than two years, after inflation slowed in five of the past six months. The Ankara-based bank reduced its overnight borrowing rate to 16.75 percent, still the highest in Europe.

EMERGING EUROPE & CIS

Kyrgyzstan

Kyrgyz President Kurmanbek Bakiyev dissolved parliament in a widely expected move that followed a weekend referendum on constitutional amendments. Kyrgyzstan, home to a US and a Russian military base, has been plagued by instability since 2005 when protests ousted veteran leader Askar Akayev and brought Bakiyev to power. Ever since, Bakiyev has sought to dissolve parliament, packed with deputies elected in a disputed poll under Akayev??™s rule. The Sunday referendum paved the way for him to do so. ???The main reason for the dissolution is a contradiction between various branches of power,??? said a presidential press service official. The official added Bakiyev had signed an order to dissolve parliament but had yet to set a date for a snap election.

Poland

Poland??™s centre-right opposition and its likely partner won a parliamentary majority in elections, paving the way to a new government to speed up market reforms and conduct a less combative foreign policy. Figures after nearly three quarters of the votes were counted showed the Civic Platform with 41% of the votes after the Sunday parliamentary election, scoring a big victory over the Kaczynski twins, who are premier and president. Their Law and Justice party received 32,2%. The centrist Peasants??™ Party, an expected coalition partner, won 9% of the votes, giving the likely government 241 seats in the 460-seat lower house of the parliament. The Civic Platform??™s victory over the ruling Law and Justice party, with the biggest turnout since the fall of communism nearly two decades ago, was a rejection of two years of turbulent rule by the nationalist twins.

Russia

Russia's economic growth will probably slow next year as global borrowing costs rise and inflation accelerates, said Mikhail Kopeikin, government deputy chief of staff. Economic growth will probably exceed 7 percent this year as high oil and gas prices fuel a ``consumer boom'' in the country, Kopeikin said in an interview in New York. ``Economic growth is sustainable and the liquidity crisis is over,'' Kopeikin said. ``However, next year's growth will be slower, including because of inflation.''

Slovenia

Conservative Lojze Peterle was set to win the first round of Slovenia??™s presidential election on Sunday, but may lose to the centre-left runner-up in a run-off next month. With 99.6% of the votes for seven candidates counted by 2005 GMT, preliminary official results showed Peterle was leading with 28.5% - well below the 50% needed to secure an outright victory.

Ukraine

Gross domestic product in Ukraine rose 7.3 percent in the first three quarters of 2007 against 6.2 percent in the same period last year, the State Statistics Committee said. The committee also reported that September's growth figures against the same month in 2006 stood at 6.2 percent. Last year's growth figure for September was 8.9 percent compared with 2005.
Ukrainian President Viktor Yushchenko said he wants a new government to be formed as soon as possible so parliament can return by the first 10 days of November. ``I demand that all political parties hurry up,'' Yushchenko said in Portugal. ``Parliament has not been working for eight months.'' Yushchenko's Our Ukraine party and former Prime Minister Yulia Timoshenko's alliance signed an agreement on Oct. 15 to form a coalition government after winning elections on Sept. 30, reuniting the partners from the 2004 Orange Revolution after almost two years of disputes. Timoshenko will get the post of prime minister, according to the coalition agreement. Her candidacy must be approved by the 450-member parliament during its first meeting.