SANAA (Reuters) - Explosions and gunfire shook a northern district of Sanaa on Thursday, in one of the worst breaches of a cease-fire between tribesmen opposed to President Ali Abdullah Saleh and troops loyal to him, residents said.
Artillery and automatic weapons fire broke out near the home of a prominent anti-Saleh tribal leader in the Hasaba district, the site of weeks of fighting that began in May and brought the impoverished Arab state closer to civil war.
Diplomatic sources said mediators from neighbouring Saudi Arabia intervened to help end the street fighting, which was the fiercest in recent weeks.
The clashes, which started just after midnight, stopped later in the morning.
Three people were killed and five wounded, a local official said. Most of the victims had been at a marketplace and a nearby building that were heavily damaged in the fighting.
Saleh, recovering in Saudi Arabia from a June assassination attempt, is holding on to power despite international pressure to quit and eight months of protests against his 33-year rule.
The United States and Saudi Arabia fear unrest in Yemen will embolden al Qaeda's Yemen-based regional wing to launch strikes on the region and beyond.
In Taiz, a hotspot of protests about 200 km (120 miles) south of Sanaa, security forces opened fire with live bullets and shot teargas, wounding dozens of protesters demanding the resignation of Saleh, activists said.
Demonstrators have grown increasingly frustrated by their inability to loosen Saleh's grip on power.
In the southern city of Aden, two explosions hit the intelligence headquarters and a police base earlier on Thursday, but did not cause much damage, a local security official said.
One young boy was shot dead when security forces responded with heavy gunfire, the official and witnesses said.
ECONOMY MAY SHRINK
Yemen's political crisis may cause the impoverished Arab state's economy to shrink this year, its central bank governor said on Thursday.
Eight months of popular unrest against Saleh rule and rising violence in the south have crippled the economy, whose output grew 8 percent last year.
"It (growth) could be negative if we continue to have this political crisis," Central Bank Governor Mohamed Bin Humam told Reuters on the sidelines of an event in Qatar.
Yemen is the Arab world's poorest country with a per capita income of less than $2,600 (1,644 pounds). Poverty, corruption and soaring unemployment have helped fuel the protests since January.
The blasts in Aden took place days after Yemen's army announced it had recaptured Zinjibar, the capital of the neighbouring province of Abyan, where militants linked to al Qaeda have mounted a rising challenge to government control.
On Thursday, air strikes killed two militants in an area near Zinjibar, a security official said.
Militants began capturing several areas in Abyan in May, but the army launched an offensive two months ago to regain territory. Tens of thousands have fled the violence.
There have been several attacks on security forces around Aden since the army began to fight the militants. Officials blamed most of the attacks on suspected al Qaeda operatives.
On Wednesday, seven militants and one soldier were killed in a suburb of Zinjibar, a military official said. Four more militants were killed in another part of the coastal city.
Opponents of Saleh have accused him of exaggerating the al Qaeda threat or even manipulating militants as a ploy to scare Washington and Riyadh into backing him.
(Reporting by Erika Solomon and Mohammed Ghobari in Sanaa, Dhuyazen Mukhashaf in Aden, Martina Fuchs and Martin Dokoupil; in Doha; Writing by Firouz Sedarat; Editing by Andrew Heavens and Myra MacDonald)