Euro jumps against dollar

The euro jumped against the dollar Monday on robust stock market gains that emboldened investors to take positions in currencies considered riskier than the greenback.
The euro in late-day trade was at 1.4217 dollars against 1.4096 late Friday in New York.
The dollar was meanwhile trading at 94.49 yen, up from 94.17 on Friday.
"The US dollar is trading with a weaker tone as equity markets continue to gain ground," said analyst Audrey Childe-Freeman of Brown Brothers Harriman.
At BNP Paribas bank analysts said in a note that "optimism regarding the recovery process has continued to increase, with reports globally suggesting that the worst is over and providing support for the asset market as well as allowing currencies to extend their rebound against the dollar and the yen."
The prevailing optimism encouraged investors to venture out of the dollar and yen and into currencies, such as the euro, seen as carrying greater risk. Trading sentiment got a boost Monday from reports that a rescue deal with creditors had been reached for CIT, a US lender to small- and mid-sized businesses, helping ease concerns that the recovering financial sector could face a fresh setback.
Still in the United States, the Conference Board economic survey for June was up 0.7 percent, a third straight monthly increase and above forecasts for a 0.5 percent gain, helping to strengthen hopes for an end to the long recession.
In further upbeat reports, the German finance ministry and central bank said the country's worst recession since World War II had lost much of its intensity.
After a disastrous first quarter, "the recessionary trend has clearly weakened" in Europe's biggest economy, the Bundesbank central bank said.
Economic activity "should have fallen only slightly" after a record contraction of 3.8 percent in the first three months of the year from the previous quarter, it added.
Finance ministry officials agreed, saying: "Available economic data support the hypothesis that second quarter economic activity was undoubtedly better than expected."
The currency market is now turning its attention to Congressional testimony Tuesday and Wednesday from US Federal Reserve Chairman Ben Bernanke.
"The financial markets will want to know how optimistic the (Fed policymakers) have become since the data began improving and what this means for the policy of quantitative easing," said Derek Halpenny of Bank of Tokyo-Mitsubishi
Quantitative easing is a process by which central banks such as the Fed, having reduced interest rates to near zero, turn to measures to increase the money supply in order to relieve a credit squeeze.
In trading here on Monday, the euro was changing hands at 1.4217 dollars against 1.4096 dollars late on Friday, 134.19 yen (132.84), 0.8628 pounds (0.8630) and 1.5202 Swiss francs (1.5181).
The dollar stood at 94.49 yen (94.17) and 1.0704 Swiss francs (1.0761).
The pound was at 1.6460 dollars (1.6333).
On the London Bullion Market, the price of gold rose to 952.75 dollars an ounce from 937.50 dollars an ounce late on Friday.

Fast Short Term Cost Reductions in a Company

In a crisis, businesses have to reduce expenses immediately to make sure the company stays solvent in the short run. Here are some strategies to get over the hump.

When a company is having a problem with a drop in sales, or a cash shortfall, management needs to find real reductions in expense. Many strategies will work in a number of industries.

Reducing Salary Cost

In many industries, salary and benefits are major components of expense, up to 80% of total cost of business in some sectors. A reduction in work force (RIF) can reduce cost, but generally takes time to take effect. There can be the immediate cost of severance, outplacement assistance or benefits that delay savings. A better short term effect is the reduction of hours from full to part time, or cutting the work day, for example from eight hours a day to seven. Lunches can be expanded in order to maintain coverage. Reducing overtime is a key strategy for immediate savings. Hourly employees, especially those on time clocks can earn incidental overtime, loosely defined as extra tenths or quarters of an hour by clocking in early or out late. Any kind outside labor, or contract labor should be reviewed. Companies pay a premium for contract labor, and unless the contract stipulates a certain number of hours, these hours can be reduced quickly in a crisis.

Some industries utilize bonuses for coverage or payments for employees to be on-call. These should always be watched closely, and if not needed, can be cut first. Position controls are listings of employees and positions listing the scheduled hours for an employee. If a position control exists, management should compare the actual worked hours to what is scheduled. They may find that some part-time employees are working full time hours.

Cutting Supply Expense

Another large area of cost in many companies is supply expense. During a major downturn, businesses can save cash by spending down inventories of supplies. In the balance sheet if something is recognized as inventory, cutting into inventory will not result in an expense saving, since this will just reduce an asset the next time supplies are inventoried. It will save cash, however, and this generally the most important goal. If the supply is expensive when purchased, using up excess stock will reduce both general ledger expense and cash outflow.

Reducing Other Expenses

Short-term savings can be achieved by cutting other non-necessary items:

• Purchased Services – Anything that is bought from vendors outside the company should be questioned. If an service can be brought in-house using current staff, employees are better utilized and expenses reduced.
• Travel and Seminar Expense – Cutting education may be a negative in the long run, but surviving to make the long run may require cutbacks. Alternatives such as webinars and distance learning may prove to more efficient and equally valuable.
• Preventative Maintenance - This tactic may prove to be short-sighted, because not maintaining equipment will be costly later on. It may be necessary to postpone cosmetic repairs or delay others. Equipment that is vital to core operations should be maintained in top working order.

Getting past a difficult period for the company will involve tough choices, but strengthening the business can help the business survive the downturn.

Sales tax zero rating facility for EPZ construction material

The government is likely to announce sales tax zero rating facility on the import and supply of construction material by investors of Export Processing Zone (EPZ) Gwadar or development of the infrastructure through amendment in the zero rating SRO.549(I)/2008. The Federal Board of Revenue (FBR) has also given permission to export upto 50 percent of the production from zone to tariff area of the country on payment of normal duties rates.

Sources told Business Recorder on Wednesday that the amendment in the SRO.549(I)/2008 would be made after vetting by the Law and Justice Division to allow sales tax zero rating on import and supply of construction material by EPZ investors. The construction materials may be incorporated in the SRO.549(I)/2008, which deals with the goods on which sales tax shall be charged at the rate of zero per cent.

Details revealed that the government has granted a number of incentives to the EPZ, Gwadar. Firstly, the Cabinet decision of June 3, 2009 regarding "Package of Incentives for Export Processing Zone Gwadar" has been implemented vide SRO No 606(I)/2009. Through this notification, tax holiday for 10 years from the commencement of commercial operation of the project has been granted to EPZ Gwadar.

Secondly, the FBR has also granted permission to export upto 50% of the production from zone to tariff area of the country on payment of usual duties. The summary for the Cabinet dated June 2, 2009 submitted by Ministry of Industries & Productions regarding package of incentives for EPZ Gwadar relating to Export Wing has been implemented by issuing SRO.600(I)/2009 amending the Customs Rules, 2001.

Thirdly, all exports from Pakistan are zero-rated for the purpose of sales tax under section 4 of the Sales Tax Act, 1990 and this facility is available to all including projects established in Export Processing Zones without any discrimination. Fourthly, presently SRO.11(I)/2008 of February 06, 2008 provides exemption from sales tax for a period of 40 years on the import and supply of materials and equipment for construction and operation of Gwadar Port and Development of Free Zone for Gwadar Port and Ship Bunker Oils bought and sold to the ships calling on/visiting Gwadar Port.

Similarly, supply of raw materials, components and goods for further manufacturer of goods in the Export -Processing Zones and import or supply made to Gwadar Economic Zones excluding vehicles are zero-rated vide S.No 5 and 8 of Fifth Schedule of the Sales Tax Act, 1990 respectively. Moreover, SRO 551(I)/2008 provides exemption on import of machinery, equipment and materials either for exclusive use within the limits of Export Processing Zone or for making exports there from and goods imported for warehousing purpose in Export Processing Zone.