UAE Monetary Authority ‘Stands Behind’ Local and Foreign Banks
The US dollar is now headed for the longest length of monthly declines against the euro since 2004 after the UAE’s monetary authority said it ‘stands behind’ local and foreign banks easing investor fears and putting downward pressure on the dollar. Brian Kim of UBS AG stated, “Everybody’s coming back to a dollar-under-pressure story. Now that the U.A.E. is coming in to help, people are relieved.” Against the euro the dollar fell 1.4% in November declining for the fifth straight month. Dubai World which is $59 billion in debt said on November 25th that it would seek a six month moratorium on payments to creditors sending ripples through stock and currency markets.
US Bank Exposure Limited
Some analysts pointed out that US bank exposure to Dubai debt is a manageable $9.9 billion compared with European banks that have lent the troubled company nine times as much. Richard Franulovich of Westpac Banking Corp stated, “I was shocked to see on Friday the savageness of the risk aversion that flowed from Dubai. In the cold light of day, the hard facts are it’s not a big hit there and moreover the authorities there have obviously stepped in and provided certain liquidity guarantees.” The dollar index which tracks the US dollar against six other major currencies fell 0.1% to 74.892 for a monthly decline of 1.8% in November.
Yen’s Rise Hurting Exports
The Japanese yen declined after a Japanese government minister said that the Japanese government will intervene to attempt to stem the yen’s rise. The yen’s rise of 5.1% against the greenback is hurting the profits of major exporters such as Sony and Toyota. Japanese strategy minister Naoto Kan who is also a deputy Prime Minister said, “In light of the Dubai shock, we want to respond more aggressively than originally planned with an extra budget. We also want to stop the yen’s rise and cooperate with the BOJ.” Investors will be paying close attention to the European Central Bank meeting and the US jobs report due Friday.
