:00:00. > :00:00.he is unacceptable. Those are the latest headlines from BBC World
:00:00. > :00:22.News. Now for the latest financial news is Sally. Crackdown in the
:00:23. > :00:27.city. Traders could be jailed for trying to rig currency rates under
:00:28. > :00:33.new UK rules. Plus ` a tough World Cup for the merchandising business.
:00:34. > :00:41.Will Brazil's shopkeepers score with the punters or lose their shirts?
:00:42. > :00:45.Hello. A very warm welcome to World Business Report. Also in the
:00:46. > :00:52.programme ` the growing interest rate divide. New Zealand's upped
:00:53. > :00:59.borrowing costs again. But first of all, we start in the city of London.
:01:00. > :01:05.Where UK Chancellor uses his annual speech to bankers tonight to
:01:06. > :01:10.announce a crackdown on the exchange market. Jail could be for traders
:01:11. > :01:15.attempting to rig prices. Britain won't be psyching `` signing up to
:01:16. > :01:20.proposed European Union regulations. Here is why what London does is so
:01:21. > :01:25.important. Currency trading is the world's biggest financial market.
:01:26. > :01:29.Worth some $5. 2 trillion every day. And believe it or not, it's the
:01:30. > :01:35.least regulated. London dominates this business, 40% of all trades are
:01:36. > :01:40.done in the city. The prices paid for currencies by businesses and
:01:41. > :01:45.investors around the world are set each day in what's known as, "4pm
:01:46. > :01:51.fix." This is based on trades done in a 60 seconds window at the end of
:01:52. > :01:55.the trading day. It's aa ledged that traders have been manipulating those
:01:56. > :01:58.prices for more than a decade by colluding with each other or pushing
:01:59. > :02:03.big orders through just before that fix. Regulators around the world are
:02:04. > :02:09.investigating the aisle a `` allegations involving some of the
:02:10. > :02:13.world's biggest banks. Britain's financial industry has been tainted
:02:14. > :02:18.in the last few years by concern of prices in some of its key markets
:02:19. > :02:22.being manipulated by small groups. From liable interest rates to gold.
:02:23. > :02:25.Now, added to that mix is the most important of them all ` foreign
:02:26. > :02:30.exchange. When people in Britain think of trading in the city of
:02:31. > :02:36.London, they probably think of the building behind me in the
:02:37. > :02:39.Institution that it represents ` the tock exchange. Trading in company
:02:40. > :02:46.shares and businesses is a tiny portion of what goes on here. The
:02:47. > :02:53.total amount of equities traded every day is $4. 5 billion. The
:02:54. > :02:58.total amount of foreign exchange traded per day is $1. 63 trillion.
:02:59. > :03:03.What exactly is alleged to have happened? Well, companies who do
:03:04. > :03:06.business across borders need a snapshot of currencies so every day
:03:07. > :03:12.they can say this asset was worth exactly this much, at this time,
:03:13. > :03:17.according to the benchmark fixed rate. It becomes tricky when they do
:03:18. > :03:21.trades on this rates they are asking their banks to give them a rate in
:03:22. > :03:25.future, 30 minutes in the future, at a rate that the bank does not know
:03:26. > :03:31.what it will be. And so the traders at the bank have to do what we call
:03:32. > :03:35.hedging positioning. They share some information with colleagues or
:03:36. > :03:38.people at other banks to try to avoid risks around when the trades
:03:39. > :03:42.are completed. That's when it all gets tricky ` the 30 minutes period.
:03:43. > :03:47.What the did they discuss with each other. An inquiry into whether or
:03:48. > :03:51.not traders colluded at the time of the snapshot is under way. Already
:03:52. > :03:56.politicians like the UK Chancellor are calling for changes. The problem
:03:57. > :03:59.is that foreign exchange is international. Even if we get some
:04:00. > :04:04.sort of regulation in place here in the UK, it would have to be agreed
:04:05. > :04:08.globally. And until that would be done, it would be impossible to
:04:09. > :04:12.regulate this market completely. So the problem is a sticky one to fix,
:04:13. > :04:17.repairing confidence without damaging the biggest financial
:04:18. > :04:23.market in the world may well take years of debate. And we'll have more
:04:24. > :04:27.comment on that story when we look at today's newspapers because of
:04:28. > :04:30.course it's in the Financial Times. Let's stay with the world of foreign
:04:31. > :04:40.exchange. New Zealand's dollar is surging after the Central Bank
:04:41. > :04:43.decided to increase rates again. I don't think you and I have talked
:04:44. > :04:48.New Zealand before. I think this is a first. Not a whole lot. It's
:04:49. > :04:52.interesting isn't it. Because of course the change in action by
:04:53. > :04:57.Central Banks around the world? That's right, Sally. And for the
:04:58. > :05:02.record ` the Reserve Bank of New Zealand's latest move makes it the
:05:03. > :05:08.only Central Bank developed economies to raise interest rates.
:05:09. > :05:13.The costs of borrowing is now at the five`year high in New Zealand. And
:05:14. > :05:18.the Reserve Bank is not holding back. Because the governor said
:05:19. > :05:24.rates would need to go even higher as strong economic growth fuels
:05:25. > :05:30.rises prices or inflation. It raised official rate to 3. 25%, the highest
:05:31. > :05:35.level since January of 2009. And the third consecutive rise in as many
:05:36. > :05:40.meetings. And the expectation is for another quarter point rate hike in
:05:41. > :05:44.July next month and one more likely in December. When you speak with
:05:45. > :05:53.analysts they expect the New Zealand dollar to strengthen with forecasts
:05:54. > :05:58.for another two rates increase. Another meeting is in Indonesia, at
:05:59. > :06:05.7. 5%. They are not expected to move as prices remain high, Sally. All
:06:06. > :06:08.right. Thank you very much. Now, as the World Cup kicks off in San Paulo
:06:09. > :06:12.today, people the world over are tuning in to see the opening
:06:13. > :06:18.ceremony. In Brazil itself, there has been a distinct lack of World
:06:19. > :06:25.Cup spirit in the run`up to the tournament. Not having the local
:06:26. > :06:30.frenzy purchasing many local shopkeepers hoped for. I am in a
:06:31. > :06:37.shopping district and market in San Paulo. And this place is famous s
:06:38. > :06:41.people as place to be able to buy everything. As Brazilians prepare
:06:42. > :06:46.for kick`off shopkeepers are taking the opportunity to cash in on the
:06:47. > :06:49.football frenzy. Whether it's a team shirt or something with a little
:06:50. > :06:54.more sparkcal, people here will find what they are looking for to support
:06:55. > :06:58.the team. People always have something to do with football,
:06:59. > :07:04.whether it's Brazil or a team from abroad. But it's something special.
:07:05. > :07:09.TRANSLATION: I am perhaps not as animated as I was with previous
:07:10. > :07:14.World Cups. Even so, I want to buy a shirt to watch the games. It's a
:07:15. > :07:20.feeling that's repeated often. The run`up to the Games hasn't been full
:07:21. > :07:25.of enthusiasm like in previous World Cups. This shopkeeper says it's been
:07:26. > :07:28.a struggle. He doubled his stock in anticipation that people would spend
:07:29. > :07:34.because the tournament was here in Brazil. But he miscalculated. This
:07:35. > :07:42.in this World Cup specifically we are not selling as much as we
:07:43. > :07:46.expected to. Because we in the last World Cups we, which were not in
:07:47. > :07:50.Brazil, they were in South Africa and Germany, the Brazilians were
:07:51. > :07:55.supporting much more the event than they are now. So this year we were
:07:56. > :07:59.expecting to sell much more than we are. I really believe this is
:08:00. > :08:04.happening because there is a lot of social and political problems which
:08:05. > :08:07.the Brazilians are facing, not only in San Paulo but all around the
:08:08. > :08:15.country. And maybe part of them do not support all of the events due to
:08:16. > :08:19.the budget that was spent on stadiums and transportation. The
:08:20. > :08:23.problem comes down to support. Ask a Brazilian if they like football,
:08:24. > :08:28.most people here say a resounding yes. Ask them if they like World Cup
:08:29. > :08:32.and many give you a very different answer. They were hopeful when
:08:33. > :08:37.Brazil starts to win there will be more support, translating into more
:08:38. > :08:44.sales, a winning combination for people here in Brazil. Well, some
:08:45. > :08:48.might see one positive move in favour of the World Cup is of course
:08:49. > :08:54.the fact that the strike on San Paulo's metro system that threatened
:08:55. > :08:56.to disrupt the opening of the events has been averted. Train workers
:08:57. > :09:01.voted against going back on strike in a pay dispute. Union bosses say
:09:02. > :09:08.they will hold a march on Thursday morning. It's not the end of the
:09:09. > :09:13.travel's country chaos as airport staff in Rio de Janeiro called a
:09:14. > :09:19.stoppage starting on Wednesday. Talks in Brussels ended in stalemate
:09:20. > :09:23.Wednesday. Russia says it will cut off Ukraine's supplies on Monday.
:09:24. > :09:30.Over an unpaid bill of $4. 5 billion. Ukraine has refused to pay
:09:31. > :09:35.after Russia nearly doubled its price after the ousting
:09:36. > :09:41.leader. Competition in India's aviation business is heating up
:09:42. > :09:46.further as Air Asia makes its first flight. The Indian arm of the
:09:47. > :09:52.no`frills airline will become the fourth budget carrier in the
:09:53. > :09:59.country. Many struggled to make money. Well, no football fever for
:10:00. > :10:04.the markets today I have to say. We see declines across the board. Japan
:10:05. > :10:10.hit hard. A lot of it is reaction to what happened in the United States.
:10:11. > :10:14.The US wobbled a little bit by the World Bank drop in the economic
:10:15. > :10:35.forecast for the global economy. I'll see you soon.
:10:36. > :10:36.Campaigners stepped up the call to