12/06/2014 World Business Report

he is unacceptable. Those are the latest headlines from BBC World

News. Now for the latest financial news is Sally. Crackdown in the

city. Traders could be jailed for trying to rig currency rates under

new UK rules. Plus ` a tough World Cup for the merchandising business.

Will Brazil's shopkeepers score with the punters or lose their shirts?

Hello. A very warm welcome to World Business Report. Also in the

programme ` the growing interest rate divide. New Zealand's upped

borrowing costs again. But first of all, we start in the city of London.

Where UK Chancellor uses his annual speech to bankers tonight to

announce a crackdown on the exchange market. Jail could be for traders

attempting to rig prices. Britain won't be psyching `` signing up to

proposed European Union regulations. Here is why what London does is so

important. Currency trading is the world's biggest financial market.

Worth some $5. 2 trillion every day. And believe it or not, it's the

least regulated. London dominates this business, 40% of all trades are

done in the city. The prices paid for currencies by businesses and

investors around the world are set each day in what's known as, "4pm

fix." This is based on trades done in a 60 seconds window at the end of

the trading day. It's aa ledged that traders have been manipulating those

prices for more than a decade by colluding with each other or pushing

big orders through just before that fix. Regulators around the world are

investigating the aisle a `` allegations involving some of the

world's biggest banks. Britain's financial industry has been tainted

in the last few years by concern of prices in some of its key markets

being manipulated by small groups. From liable interest rates to gold.

Now, added to that mix is the most important of them all ` foreign

exchange. When people in Britain think of trading in the city of

London, they probably think of the building behind me in the

Institution that it represents ` the tock exchange. Trading in company

shares and businesses is a tiny portion of what goes on here. The

total amount of equities traded every day is $4. 5 billion. The

total amount of foreign exchange traded per day is $1. 63 trillion.

What exactly is alleged to have happened? Well, companies who do

business across borders need a snapshot of currencies so every day

they can say this asset was worth exactly this much, at this time,

according to the benchmark fixed rate. It becomes tricky when they do

trades on this rates they are asking their banks to give them a rate in

future, 30 minutes in the future, at a rate that the bank does not know

what it will be. And so the traders at the bank have to do what we call

hedging positioning. They share some information with colleagues or

people at other banks to try to avoid risks around when the trades

are completed. That's when it all gets tricky ` the 30 minutes period.

What the did they discuss with each other. An inquiry into whether or

not traders colluded at the time of the snapshot is under way. Already

politicians like the UK Chancellor are calling for changes. The problem

is that foreign exchange is international. Even if we get some

sort of regulation in place here in the UK, it would have to be agreed

globally. And until that would be done, it would be impossible to

regulate this market completely. So the problem is a sticky one to fix,

repairing confidence without damaging the biggest financial

market in the world may well take years of debate. And we'll have more

comment on that story when we look at today's newspapers because of

course it's in the Financial Times. Let's stay with the world of foreign

exchange. New Zealand's dollar is surging after the Central Bank

decided to increase rates again. I don't think you and I have talked

New Zealand before. I think this is a first. Not a whole lot. It's

interesting isn't it. Because of course the change in action by

Central Banks around the world? That's right, Sally. And for the

record ` the Reserve Bank of New Zealand's latest move makes it the

only Central Bank developed economies to raise interest rates.

The costs of borrowing is now at the five`year high in New Zealand. And

the Reserve Bank is not holding back. Because the governor said

rates would need to go even higher as strong economic growth fuels

rises prices or inflation. It raised official rate to 3. 25%, the highest

level since January of 2009. And the third consecutive rise in as many

meetings. And the expectation is for another quarter point rate hike in

July next month and one more likely in December. When you speak with

analysts they expect the New Zealand dollar to strengthen with forecasts

for another two rates increase. Another meeting is in Indonesia, at

7. 5%. They are not expected to move as prices remain high, Sally. All

right. Thank you very much. Now, as the World Cup kicks off in San Paulo

today, people the world over are tuning in to see the opening

ceremony. In Brazil itself, there has been a distinct lack of World

Cup spirit in the run`up to the tournament. Not having the local

frenzy purchasing many local shopkeepers hoped for. I am in a

shopping district and market in San Paulo. And this place is famous s

people as place to be able to buy everything. As Brazilians prepare

for kick`off shopkeepers are taking the opportunity to cash in on the

football frenzy. Whether it's a team shirt or something with a little

more sparkcal, people here will find what they are looking for to support

the team. People always have something to do with football,

whether it's Brazil or a team from abroad. But it's something special.

TRANSLATION: I am perhaps not as animated as I was with previous

World Cups. Even so, I want to buy a shirt to watch the games. It's a

feeling that's repeated often. The run`up to the Games hasn't been full

of enthusiasm like in previous World Cups. This shopkeeper says it's been

a struggle. He doubled his stock in anticipation that people would spend

because the tournament was here in Brazil. But he miscalculated. This

in this World Cup specifically we are not selling as much as we

expected to. Because we in the last World Cups we, which were not in

Brazil, they were in South Africa and Germany, the Brazilians were

supporting much more the event than they are now. So this year we were

expecting to sell much more than we are. I really believe this is

happening because there is a lot of social and political problems which

the Brazilians are facing, not only in San Paulo but all around the

country. And maybe part of them do not support all of the events due to

the budget that was spent on stadiums and transportation. The

problem comes down to support. Ask a Brazilian if they like football,

most people here say a resounding yes. Ask them if they like World Cup

and many give you a very different answer. They were hopeful when

Brazil starts to win there will be more support, translating into more

sales, a winning combination for people here in Brazil. Well, some

might see one positive move in favour of the World Cup is of course

the fact that the strike on San Paulo's metro system that threatened

to disrupt the opening of the events has been averted. Train workers

voted against going back on strike in a pay dispute. Union bosses say

they will hold a march on Thursday morning. It's not the end of the

travel's country chaos as airport staff in Rio de Janeiro called a

stoppage starting on Wednesday. Talks in Brussels ended in stalemate

Wednesday. Russia says it will cut off Ukraine's supplies on Monday.

Over an unpaid bill of $4. 5 billion. Ukraine has refused to pay

after Russia nearly doubled its price after the ousting

leader. Competition in India's aviation business is heating up

further as Air Asia makes its first flight. The Indian arm of the

no`frills airline will become the fourth budget carrier in the

country. Many struggled to make money. Well, no football fever for

the markets today I have to say. We see declines across the board. Japan

hit hard. A lot of it is reaction to what happened in the United States.

The US wobbled a little bit by the World Bank drop in the economic

forecast for the global economy. I'll see you soon.

Campaigners stepped up the call to