Ten killed in militant attack in Pakistan's Swat

MINGORA, Pakistan (Reuters) - Militants attacked the home of a district government official in Pakistan's Swat Valley on Monday, killing three members of his family and seven guards, police said.

Stemming growing militant violence is a test for a fractious coalition government preoccupied with infighting after staunch U.S. ally Pervez Musharraf quit as president last week.

Troops have been battling militants in the Swat Valley, northwest of Islamabad, for the past year but fighting has intensified in recent weeks with 50 militants and 10 soldiers killed in clashes since Friday.

"Militants attacked the house with RPGs (rocket-propelled grenades) at around 8:00 a.m.," said police official Snober Khan.

The Swat valley was one of the country's main tourist destinations until last year when Pakistani Taliban fighters infiltrated from enclaves on the Afghan border to support a radical cleric bent on imposing hardline Islamist rule.

It is now one of several areas in the northwest where security forces are battling militants.

Security concerns, uncertainty over the government's future and worry about the economy have unnerved investor confidence and sent the nuclear-armed country's financial markets skidding lower.

The rupee hit a new low to the dollar in Friday trading while Pakistan's stock market has fallen about 29 percent this year.

UPPER HAND

Assassinated former prime minister Benazir Bhutto's husband, Asif Ali Zardari, said in an interview with the BBC the Pakistani Taliban had "the upper hand" and should be put on the list of banned organizations.

"It is an insurgency", said Zardari, who has been nominated by his party to be the country's next president. "It is our country and we will defend it."

"The world is losing the war. I think at the moment they definitely have the upper hand," Zardari said of the militants accused by the previous government of being behind the December 27 assassination of his wife in a suicide attack.

Musharraf's resignation has raised questions about the government's commitment to tackle violence.

But while Musharraf's support for the U.S.-led war on terrorism was deeply unpopular, the government has vowed to keep up efforts to fight the militants.

Fear of violence is hurting more than Pakistan's economy.

Next month's Champions Trophy in Pakistan was postponed for 13 months on Sunday after five of the eight nations due to take part in the cricket competition confirmed they would not send a team because of security concerns.

England, Australia, New Zealand and the West Indies told a teleconference they would join South Africa who pulled out on Friday.

Pakistan, India and Sri Lanka were the other teams scheduled to take part in the September 12-28 competition.

(Reporting by Junaid Khan; Editing by Robert Birsel and Valerie Lee)