abcnews.go.com The Associated Press CARACAS, Venezuela Jan. 22 —

Venezuela's Supreme Court suspended a Feb. 2 referendum on President Hugo Chavez's rule Wednesday until it can determine whether it is legal, a blow to opposition leaders hoping the vote would lead to his removal.

Chavez's allies had appealed to the court to rule the nonbinding referendum unconstitutional. The court on Wednesday ordered the National Elections Council to stop organizing the referendum until a final ruling on its legality is made, said Julio Montoya, a pro-Chavez lawyer in the case.

It was not clear when the final ruling would be made.

Tens of thousands of Chavez opponents fought through bullets and tear gas Nov. 4 to deliver a petition signed by 2 million people required for holding the vote. The elections council set the vote for Feb. 2.

The opposition then launched a general strike Dec. 2, demanding Chavez consent to the referendum and promise to abide by it. The strike has slashed production in the world's fifth-largest exporter by more than two-thirds.

Chavez says opponents must wait until a binding referendum, which the constitution allows midway through his six-year term, or August. But opponents cite a constitutional clause that allows citizens to petition for referendums on "matters of national importance" at any time.

Also Wednesday, Venezuela's central bank suspended its foreign exchange trading for a week to try to keep the country's currency, the bolivar, from further plummeting in the fallout of a 52-day-old strike that has crippled oil exports.

Finance Minister Tobias Nobrega said a new foreign exchange policy will be revealed in five business days. He said the policy would involve "restrictions" to foreign exchange trade but did not elaborate.

"The government must adopt urgent measures to prevent our international reserves from further deteriorating," Nobrega said in a television address. The strike has "undoubtedly devastated the economy. The year 2003 begins with a very delicate fiscal and financial situation."

The announcement led to speculation that the government was planning to impose exchange controls to protect its depleting foreign reserves and halt the bolivar's slide, which has lost a quarter of its value this month.

"It sounds like exchange controls are on the way," said Miguel Octavio, executive director of local investment banker BBO Financial Services.

The suspension means that Venezuelans cannot buy foreign currencies for five business days. The government said it would continue to pay its foreign debts.

Exchange controls could help strengthen the bolivar by limiting the amount of dollars that individuals and banks can buy. But they could also hurt businesses that depend on dollars to pay for imported goods. Venezuela's economy is highly dependent on imports about 50 percent of food is imported.

The bolivar currency reached a record low of 1,853 to the dollar Tuesday. It has lost 25 percent of the its value since the beginning of the year, after losing 46 percent of its value in 2002. The depreciation has contributed to 30 percent inflation.

Traders said the Central Bank has been injecting up to $70 million a day to protect the currency. Venezuela's foreign reserves stood at $11.05 billion Monday, down from about $12.5 billion before the strike began. Venezuela also has about $2.9 billion in a rainy day fund that absorbs excess oil revenue.

Opposition and government negotiators are studying proposals made by former President Jimmy Carter to end the dispute over Chavez's rule.

The Nobel Peace Prize laureate proposed two plans Tuesday. The first entails general elections and an end to the strike. The second proposal calls for both sides to prepare for the August binding referendum.

The first plan would amend Venezuela's constitution to shorten presidential and legislative terms of office and stage early elections.

It calls for the opposition to end the strike and for the government, which has a congressional majority, to move quickly on changing the constitution. Amending the constitution requires the approval of congress and a popular referendum.

A so-called "Group of Friends of Venezuela," a forum of six countries the United States, Mexico, Brazil, Chile, Spain and Portugal has been formed to help end the standoff. Diplomats involved in the initiative will hold their first meeting at the Organization of American States in Washington on Friday.

Chavez was elected in 1998 and re-elected in 2000 on promises to help the country's poor majority, but he has failed to remedy the nation's economic ills.

Opponents blame Chavez's leftist policies for an estimated 8 percent economic contraction in 2002. Chavez blames it on opposition attempts to destabilize the country.

www.forbes.com Reuters, 01.22.03, 2:38 PM ET

CARACAS, Venezuela (Reuters) - Venezuela's Supreme Court Wednesday ordered the suspension of a planned February nonbinding referendum on the rule of President Hugo Chavez, dealing a blow to opposition hopes to inflict a symbolic political defeat on the leftist leader.

Electoral authorities had set the referendum for Feb. 2, after the opposition had collected more than 2 million signatures to request the poll, which would have asked voters whether or not the populist president should resign.

But Chavez's government, which is battling a seven-week opposition strike, objected to the vote as unconstitutional and appealed to the Supreme Court to stop it from going ahead.

"This means that the referendum is frozen,' Romulo Rangel of the country's National Electoral Council, the official electoral authority, told reporters.

Chavez, who was voted into office in 1998 and is refusing opposition calls to step down and hold early elections, had said he would ignore the result of the nonbinding referendum, even if he lost by 90 percent.

A defeat in the poll would not have legally obliged Chavez to resign, but the opposition had been hoping it would show they could beat him in a vote.

Chavez has said they should wait until Aug. 19, halfway through his term, when the constitution allows for a binding referendum on his current mandate, which is scheduled to last until early 2007.

www.news.com.au From correspondents in Caracas, Venezuela January 23, 2003

VENEZUELA'S central bank has suspended its foreign exchange trading for a week in a bid to stop the country's currency further plummeting in the fallout from a 52-day-old strike that has crippled oil exports. Finance Minister Tobias Nobrega today said a new foreign exchange policy would be revealed in five business days.

He said the policy would involve "restrictions" to foreign exchange trade, but did not elaborate.

"The government must adopt urgent measures to prevent our international reserves from further deteriorating," Nobrega said in television address.

The strike had "undoubtedly devastated the economy", he added.

reuters.com Wed January 22, 2003 01:36 PM ET By Andrea Ricci

NEW YORK (Reuters) - The dollar was barely changed on Wednesday as it consolidated after recent losses, but dealers said the greenback remained vulnerable to news on Iraq.

The dollar, which has plumbed fresh three-year lows against the euro for five sessions in a row, climbed off the latest low of $1.0744 per euro reached during Asian trading hours but failed to make much headway.

It was the same story against the Swiss franc, where the dollar was idling above four-year lows touched on Tuesday.

"The dollar has had a really big move down, and there are still people who are looking for a correction ... and willing to buy on dips," said Bob Lynch, currency strategist at BNP Paribas in New York.

"But by and large, the dollar's declines against the euro and the Swiss franc are intact," he said.

The dollar has fallen almost uninterrupted since early December on worries over possible war with Iraq, and dealers said that the bias toward the greenback would remain negative as long as geopolitical tensions persisted.

The White House kept up the pressure on Iraq on Wednesday, with President Bush warning Iraq's military that its members would be prosecuted as war criminals if they used weapons of mass destruction on U.S. troops or their own people.

In early afternoon in New York, the dollar was trading at $1.0716 per euro, nearly flat on the session but above the overnight lows. Against the Swiss franc, it was up about a tenth of a percent at 1.3641 francs to the dollar, above the four-year low of 1.3605 struck on Tuesday.

DOLLAR NOT TOO WEAK?

The dollar's sharp decline has not gone unnoticed by policymakers outside the United States; but in Europe at least, few appear concerned.

Indeed, European Central Bank council member Ernst Welteke told the German sister paper of the Financial Times that the dollar was not too weak on foreign exchange markets and needed no support.

Japan, on the other hand, on Wednesday once again reminded the market that it was ready to act against foreign exchange moves which were too rapid. Japan would like a weaker yen to help its export sector, and its threats of yen-selling intervention have given support to the dollar.

Japanese Prime Minister Junichiro Koizumi was one of a number of officials who weighed in on Wednesday, with Koizumi saying the government would take appropriate action on foreign exchange as needed.

The dollar was at 118.29 yen JPY= in early afternoon in New York, up 0.16 percent.

Dealers said the White House policy toward the dollar appeared to be one of benign neglect, but most were waiting to see how John Snow, the White House nominee for Treasury Secretary, addressed the issue.

Snow goes before the Senate for confirmation hearings next Tuesday.

The White House on Wednesday said it was confident Snow would be confirmed, despite revelations that he had been arrested in 1982 on a drunk driving charge, which was dismissed, and had been involved in a child support payment dispute in 1988.

VENEZUELA ENACTS CURRENCY CONTROLS

In Venezuela, the central bank on Wednesday said it was closing the country's foreign exchange market for five trading days as the government moved to stem capital flight spurred by a crippling seven-week opposition strike against leftist President Hugo Chavez.

The bolivar has tumbled more than 24 percent against the dollar since the start of this year and 28.5 percent since the strike started on Dec. 2.

Clyde Wardle, emerging markets currency strategist at HSBC in New York, said the central bank wanted to give the market a breather.

"The bank is hoping that in the next few days there might be a resolution to the strike, which would lead to a pullback in the bolivar," he said.

But without movement on the strike front, the central bank's efforts were unlikely to be successful, he said.

"If there is no progress on ending the strike, or at least seeing the two sides come closer together, then what we may see is that the central bank extends the moratorium," he said.

reuters.com Wed January 22, 2003 01:26 PM ET By Pedro Nicolaci da Costa

NEW YORK (Reuters) - Treasuries trudged higher on Wednesday, but trading was muted as uncertainty over the prospect of a U.S. war against Iraq forced investors to play a waiting game.

A drop in stocks following a number of lukewarm corporate earnings reports also benefited safe-haven bonds.

"There's fear, fear of war," said Bill Hornbarger, chief fixed-income strategist at A.G. Edwards & Sons in St. Louis. "That's really the thing that is hanging over the financial markets right now."

Government debt will likely remain stuck in its current range, with yields on the benchmark 10-year note US10YT=RR hovering around 4 percent until further developments on Iraq lend the market a sense of direction, Hornbarger said.

After a wave of selling that started the year when a flood of fund managers and traders dumped government bonds and shifted funds into the equity market, Treasuries have retraced most of their losses and two-year yields are back close to record lows.

At 12:40 p.m. (1740 GMT), two-year notes US2YT=RR edged up 1/32 in price for a yield of 1.63 percent from 1.64 percent on Tuesday. Five-year notes US5YT=RR added 6/32 giving a yield of 2.88 percent from 2.92 percent on Tuesday.

Benchmark 10-year notes added 9/32 in price taking yields to 3.94 percent from 3.97 percent. The 30-year bond US30YT=RR advanced 13/32 to 107-23/32, yielding 4.87 percent, versus 4.90 percent at Tuesday's close.

A weekly ABC News/Money magazine report showing a record drop in consumer confidence to a fresh nine-year low in the latest week also reinforced feelings of malaise surrounding the economy.

Meanwhile, disappointing earnings results from corporate giants like Motorola Inc. MOT.N and Eastman Kodak EK.N and J.P. Morgan Chase JPM.N burdened the stock market, dragging major indices lower on the day and giving the bond market a modest safe-haven bid.

"The Street is short, corporate earnings are bad, stock prices are lousy, there's a chance of war," said Vincent Verterano, head governments trader at Nomura Securities. "There's no place for investors to put their money, so they're putting it into Treasuries again."

Michael Moran, chief economist at Daiwa Securities, said should the U.S. go to war, the economy risked slowing further.

"Two things point in that direction. One is what might happen to oil prices and what might occur in terms of terrorist retaliation. Both of those things could crimp economic activity," Moran said.

Global oil production has already been crippled by general strike in Venezuela, now in its 52nd day, aimed at ousting President Hugo Chavez. News that the South American country shut down its forex market for five trading days, looking for ways to curb capital flight amid the ongoing political crisis, was also supportive for U.S. Treasuries, analysts said.

NYMEX crude oil futures CLH3 were little changed on Wednesday, but at $33 a barrel, are well above the roughly $20 a barrel at which they traded just a year ago.