UAE Central Bank to Provide Emergency Liquidity

Investors have calmed down since Dubai World requested a six month moratorium on debt payments. The actions by he UAE Central Bank to provide emergency liquidity to Dubai calmed investor fears. The dollar erased last weeks gains and continues its long term decline as risk aversion eased. The dollar fell against most major world currencies as better than expected pending home sales and actions by Dubai World raised risk sentiment. Sebastien Galy of BNP Paribas SA stated, “The Dubai effect is fading. Equities have had time to rally, and the foreign-exchange market is basically following.” During the current recession currencies often follow the lead of stock and commodity markets.

Dubai World Begins Talks With Banks

The Standard & Poor’s 500 Index rose 1.3% and European stocks rose putting downward pressure on safe haven currencies such as the US dollar and the yen. Dubai World announced it has begun talks with banks to restructure $26 billion in debt and is seeking to put off payments of half of its $59 billion debt easing default fears among investors. The euro gained on the dollar after London-based Markit Economics reported that European manufacturing grew for the second straight month. The Australian dollar rose 0.6% to 92.14 U.S. after the Reserve Bank of Australia announced it would raise rates to 3.75%.

Japanese Government to Stem Yen’s Appreciation

Japan’s National Strategy Minister Kan said that the government has agreed to step in and try to stem the yen’s appreciation which is hurting exporters like industrial giants Sony and Toyota. Investors will be watching the US jobs report due December 3rd and job losses are expected to be around 480,000 up from last month’s job losses of 466,000. The report will also contain third quarter productivity and labor costs. On December 4th the non farm payrolls and unemployment report will be released and unemployment is expected to remain at 10.2% pointing to a prolonged recovery.