The European Central Bank warned Thursday that high inflation and threats to growth could last longer than expected, pushing the dollar lower on foreign exchange markets. Foreign exchange dealers sold dollars after estimating the ECB would keep its key interest rate unchanged while the US Federal Reserve was expected to cut its fed funds rate further at a meeting later this month, AFP wrote.
“The notion of an ECB being on hold for longer after the latest rise in inflation ... is pushing the euro back towards $1.60“, Commerzbank economist Antje Praefcke said. The single currency set a record of $1.5984 before later easing back to 1.5956 against the greenback.
“The euro area is experiencing a rather protracted period of temporarily high annual rates of inflation, resulting mainly from increases in energy and food prices,“ the ECB had said in its latest monthly bulletin.
It added that “the level of uncertainty resulting from the turmoil in financial markets remains unusually high and tensions may last longer than initially expected.“

World business chiefs gathered in Tokyo on Thursday to discuss ways to tackle global warming as trans-Atlantic tensions emerged over how far industry should go to reduce emissions, AFP reported.
The heads of the business federations of the Group of Eight industrialized nations agreed that climate change needs serious attention. But in a joint statement issued after the one-day meeting they said companies should not be “unduly penalized by unbalanced policy measures that would divert resources away from investments in innovation.“
Earlier in the gathering divisions emerged over whether companies are doing enough and how to respond to the problem. “The question is not any more, ’Should we go for it?’ The question now is, ’How can we do it?’“ Laurence Parisot, president of the French Business Confederation, said.
“There are many ways to reduce greenhouse gas emission, but the bottom line is (that it’s best) to do so through technological innovation,“ said Fujio Mitarai, chairman of the Japan Business Federation, which favors a sector-by-sector approach to reducing emissions.

Russian President Vladimir Putin agreed to forgive $4.5 billion in Libyan debt Thursday in exchange for future business, the Russian leader said. “We are satisfied with the way we have resolved this problem,“ Putin said. “I am absolutely convinced that the scheme we have arrived at will benefit both the Russian and the Libyan economies.“
Putin and Libyan leader Moammar Qaddafi signed 10 separate deals Thursday, Ria Novosti reported.
The deals include a joint venture between Russian natural gas giant Gazprom and Libya’s National Oil Cooperation and a $2 billion railroad deal for Russian Railways, the report said. The visit comes as Russia is trying to coordinate policy with other gas producing states, notably Algeria and is promoting plans for an organization of gas producers similar to OPEC, of which Libya is a member, AFP wrote.
Libya has natural gas reserves estimated at 1.314 trillion cubic meters (45.990 trillion cubic feet) and is the African continent’s second largest oil producer at 1.7 million barrels per day.

India’s central bank ordered banks to set aside more money to cool lending, adding to government efforts to rein in inflation running near a three-year high, Bloomberg reported.
The Reserve Bank of India will raise the cash reserve ratio to eight percent from 7.5 percent in two phases by May 10, according to a statement in Mumbai on Thursday. The increase, the first in 2008, will drain as much as 185 billion rupees ($4.6 billion) from the financial system.
India’s inflation rate has more than doubled in the past four months amid soaring commodity and food prices, undermining support for Prime Minister Manmohan Singh’s Congress party ahead of election due in a year’s time. The central bank’s move came a day after China, fighting to tame 11-year-high inflation, also told commercial lenders to set aside more cash.
“Given the huge political importance of inflation in India, we expect the Reserve Bank will continue its tightening measures“, said Tushar Poddar, a Mumbai-based economist at Goldman Sachs Group Inc. “The guiding principle would be to arrest inflationary expectations and further slow demand.“

As food prices march steadily higher, some countries have either restricted or banned exports of some basic commodities in order to ensure supplies at home.

EU trade chief Peter Mandelson warned on Thursday against restrictions on food exports in the face of soaring prices, arguing that they could trigger a “spiral of protectionism.“
“By chasing an illusion of food security these policies throttle domestic production, choke off supplies to others and risk leading to a spiral of protectionism and dwindling production,“ Mandelson was quoted by AFP as saying.
The food crisis has fuelled protests in some countries and even spilled over into violence in several nations, including Egypt, Cameroon and Haiti, where the prime minister was ousted as a result.
As food prices march steadily higher, some countries have either restricted or banned exports of some basic commodities in order to ensure supplies at home. Indonesia for instance has banned its farmers from selling rice abroad and Kazakhstan, one of the world’s top producers of wheat, has halted foreign sales.
“I do not underestimate the political pressures which can push governments in this direction,“ Mandelson told lawmakers at the European Parliament in Brussels. “But as a general rule, export taxes, quotas or bans do not make economic or development sense,“ he said. “In the case of basic agricultural commodities, they make even less sense.“
The food price crisis could even represent an opportunity for some developing nation agricultural powers if rich countries granted them better access to their markets, Mandleson said.
“While we address the downsides of high prices, we should also not forget that they also have the potential to benefit people in the developing world because many have a comparative advantage in agriculture,“ he said. “Giving them the means and the markets to exploit those advantages is the best way to address the issue of food supply in the long term, in particular for the poorest countries,“ he added.
In related news, Bangladesh started its rice harvest Thursday with hopes of a bumper crop, but a farmland crunch in China and the Philippines underlines trouble ahead in dealing with the global food crisis.
Rice prices in impoverished Bangladesh, which have doubled in the past 12 months, have started falling as hoarders sell stocks before new supplies come on the market, officials said. “With the bumper ’Boro’ harvest that’s expected and the sufficiency in strategic stocks, there’s unlikely to be a (food) crisis in this country,“ said Bangladesh Foreign Minister Iftekhar Ahmed Chowdhury.
But Chowdhury renewed an appeal for a global strategy to tackle spiraling worldwide commodity prices, saying the United Nations was perhaps best suited to handle it.
The upbeat news from Bangladesh came as Chinese state press said the amount of farmland in China shrank closer to critical levels last year and the Philippines banned the conversion of farmland to other uses.
Anger over high prices and low wages erupted into violence last Saturday in Bangladesh when 10,000 garment workers rioted near the capital Dhaka, smashing cars and buses and vandalizing factories.
Record oil prices--New York’s main oil futures contract held steady near $115 a barrel Thursday--have exacerbated the crisis, cutting into cash consumers have not already spent on food and hitting the poor particularly hard.